September 22, 2023 • By Dennis Beaver
A common complaint — especially from small-business owners — is the failure or refusal of their customers or clients to pay their bills on time, or pay them at all.
I submit that a certain amount of this, sadly, is encouraged by owners. Here is a recent example:
“Wonderful Tree Trimming and Landscaping” is a mom-and-pop company in my town.
“Marge” runs the show, and she is the nicest, most patient business owner you’ll ever meet. And that’s the problem. She is way too nice, too patient and non-confrontational to a fault.
I got a call from her office manager, asking if I can help them with several past-due accounts.
“Of course,” I reply. “How old are they?”
“Only two years.”
“What? Only two years,” I repeat in a less-than-happy tone of voice. “What were you folks thinking?”
“Well, Marge likes to be patient and nice to people.”
“I am not. Please scan and send me the bills now!”
Not paying for services rendered could be fraud
Without legal justification, an intent not to pay can be inferred — like dine-and-dash restaurant rip-offs — as fraud and theft of services. This can justify an award of punitive damages.
Notes on their accounts revealed textbook examples of fraud and theft of services by people who agreed to pay for the tree trimming but offered one nonsensical excuse after another, made repeated promises to pay but never did or contested their entire credit card charge.
I reached one of them and asked that he bring a check to my office. He replied, “Money doesn’t grow on trees.”
My response in a most unfriendly tone of voice was, “I am going to enjoy suing you for the tree trimming and punitive damages for your obvious lack of intent to pay.”
Soon thereafter, Marge texted: “Whatever you did worked! He called me around 2:30 p.m. and brought us a check by 3 p.m.”
Strong office manager/collections person, good
In my experience representing small-business owners, patience is not a virtue. A strong office manager/collections person who you authorize to immediately jump on past-due accounts is critical.
Often crooked customers say, “I never got your bill, so please mail another.” If possible, fax the bill to them. This gives you proof of receipt. If you are in the same town, go to them and politely hand a copy to the customer or, a receptionist.
Online recommendations suggest being sugary sweet on the phone to past-due customers.
I disagree. The customer who, without justification, doesn’t pay, is a thief, and the sooner you and your people recognize and accept that, the better.
So, the payment is past due, was promised to be received by a certain date, does not arrive, you have one option: Call and say, “No more delays. We will pick up a check at your office today, and if it isn’t there, this goes to our lawyer, whose nickname is Mad Dog.”
But why even put yourself at risk of being jerked around by an unknown customer?
Check your court’s plaintiff/defendant index to see if a potential customer has been sued and for what. Require a signed credit application that will allow you to check their credit and find out if they’ve gotten in trouble before for not paying.
Convince customers you aren’t serious
Want to be stiffed? Convince your customer that you aren’t serious, and I hear this all the time: “We’ve been sending them past-due notices every month for a year, and we thought that would scare them into doing something.”
They did something all right: They ignored you.
If the first letter or phone call gets no response, consider having your lawyer place a call and send a demand letter. That should be very inexpensive. Still no response? If you are within or close to your small claims court’s monetary jurisdiction, file suit.
Action earns the respect of employees, customers
“When business owners give collections the attention needed, this earns respect from employees. And, no matter how well you pay someone, respect and loyalty have no price,” observes David Schein, Cameron Endowed Chair of Marketing & Management at the University of St. Thomas in Houston.
“I tell businesses to have a one-two-three approach to collections,” he says. “Send invoice within 30 days. If not paid in 60 days, send letter with overdue invoice indicating that it will be turned over to your attorney if not paid promptly. At 90 days, turn it over to your attorney. Many of my businesses get paid with that 60-day letter.”
In case you wonder, “Dennis, how do you personally feel about these situations?” I’ll tell you. Angry, and I share the feelings of my clients who have done the work, performed the service and been ripped off. To treat people that way, in addition to a breach of contract, is simply immoral.
Collecting those debts gives me a great deal of moral satisfaction.”