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Ask HN: Advice regarding past due accounts and getting paid?
My company does hosted load testing on a consulting basis. Most of my competitors don't demand upfront payment, so we haven't either. My last two clients are proving difficult to collect payment from. This is a huge let-down to me.
I'm wondering if anyone has advice on collecting past due accounts (or preventing them)? I'd like to hear how you approach collection in scenarios like this? Steps? Timeframes? Lawyers? Rules of thumb? Etc. Thanks!
- duh 17y agoGrow a spine and stop working if payment is late, even by one day.
- sganesh 17y agoHere's a businessweek slideshow.. http://images.businessweek.com/ss/09/02/0212_how_to_collect/index.htm http://images.businessweek.com/ss/09/02/0212_how_to_collect/...
- mechanical_fish 17y agoDemand upfront payment. ;) Failing that, make the quantum of unpaid work as small as possible. Offer them the first three hours on credit, but make them pay a bill before they get a second three hours. Write your contracts to specify several intermediate payments. This is how, e.g., construction contractors work: one third up front, one third at the midpoint of work, one third at the end. Or something like that. Write contracts that involve writing code and demonstrating it to the client, but stipulate that you won't deliver the final product until after you're paid. Keep them on a very regular schedule. Don't go very far out on a limb: Don't ever let yourself get several months ahead of the paycheck. This is particularly important with the first paycheck: Don't work too much before sending the client some sort of bill -- even if it's just a partial bill -- and establishing that they will pay. For all you know, your client is a mid-level employee without signing authority who cannot pay you without permission from a higher-level manager in a rival department. Or something. But, of course, past performance is no guarantee of future results. Customers run out of money. Customers turn over their personnel. Customers have internal reorganizations. Trust, but verify.
- ericb 17y agoThe going out on a limb part is tough as a solution as the testing itself happens pretty quickly--it isn't quite the same as something like web development which may go on for a while. I might switch to demanding half up front for all but the largest customers, though.
- mechanical_fish 17y agoYeah, I realize this. But you understand your business better than I, and it's possible that if you think about the business in terms of "I need to get some earnest money as soon as possible" you'll think of a way to restructure your deals. The concept of "refundable deposit" may be useful to you, for example.
- jacquesm 17y agoRe. past due accounts: Call. Every day. Be very polite, tell them that you still haven't received payment and that you'd like to know for sure that payment has been made. Repeat. This worked flawlessly for me in the past but I did take in to account that I probably wouldn't be working for those customers ever again (and funny enough, in most cases I did, and in most cases I used these as reasons to demand up front payment on future jobs). The squeaky wheel gets the grease...
- jlees 17y agoyup, calling every day was the only way I managed to get past due payment I was owed in the past. If they hedge (oh it's in our internal systems) ask for a day to call them back and call back the day before. For my cases it's usually been someone different handling the finances side of things, and the customer who I dealt with is actually embarrassed payment hasn't been made. You could also start charging interest on the overdue bill, but I believe you have to state this in your invoice. then you have an excuse to call - to update them on the amount they owe. I've not heard of anyone at startup level resorting to a collections agency but I have heard of the small claims court being involved sometimes. Never had to go that far myself, so I can't really comment.
- eli 17y agoI'd go collections before a lawsuit, for sure. Most collections agencies cost you little or nothing up front, they just split whatever they collect. Hiring a lawyer or spending your valuable time deciphering legal forms is almost definitely going to cost you more up front.
- eli 17y agoWe invoice again with a big red OVERDUE stamp and call. Then call again. And again. Then send a letter and another invoice. Call again. If there are enough outstanding accounts we sometimes hire a stern-voiced contractor to call people. Worst case, we give a collections agency the extremely delinquent (like, years old) accounts. They basically split whatever they can collect with us. They usually don't get much (if people were gonna pay, they'd have paid) Oh, and of course we don't continue to sell to people who are more than a few months overdue.
- mark_l_watson 17y agoI offer a 12.5% discount for customers who use 'express service' which basically means that they agree to pay within 7 days of invoice and agree to use my simple NDA/contract and not use up my time doing contract negotiation. If they don't pay on time, they lose the discount. I've been lucky: only one no-pay in 12 years, and that was for about an hour of work on what was originally a half day estimate (the "customer" sincerely thanked, but said that it was not worth his trouble to pay a tiny one hour invoice). I just let it slide, but in retrospect, I wish that I had re-submitted the invoice.
- radley 17y agoI'll usually do 5% discount for Net15 (15 day turn around). More than 10% is pretty steep...
- cubicray 17y agosome links: http://webworkerdaily.com/2008/08/28/getting-delinquent-clients-to-pay-you-on-time/ http://webworkerdaily.com/2008/08/28/getting-delinquent-clie... http://webworkerdaily.com/2009/09/11/tips-from-the-trenches-get-your-clients-to-pay-up/ http://webworkerdaily.com/2009/09/11/tips-from-the-trenches-... http://www.acuitydesigns.net/how-to-deal-with-non-paying-clients/ http://www.acuitydesigns.net/how-to-deal-with-non-paying-cli... http://articles.sitepoint.com/article/7-great-rip-offs http://articles.sitepoint.com/article/7-great-rip-offs