Need your advice - Customer doesn't pay!

[chrisits]

Back in June we installed a new server for one of our customers.
The customer is happy with our work and uses the server every day... BUT he hasn't paid for our work yet (original terms: net+30). We talked with him several times, he always apologizes and promises to send the payment... but the payment never arrives.

What should I do next?

[lpopejoy]

Re: Need your advice - Customer doesn't pay!

I would schedule a meeting with him. Keep it all as friendly as possible. Ask him if he was happy with your work... If there is a problem... If it just a matter of cash flow, etc... If he is having a problem with cash flow, try to work out a payment arrangement with him for a finance fee or maybe no finance fee depending on your preferences. If you can help him through it, you may have a friend and client for life. On the hand, he may just be one of those people who is irresponsible and a general liability to work for - you have to make that decision. You can't over communicate. Silence kills.

Explain that you really can't do more work until you get a check for payment for what he owes you - unless he pays you upfront.

[chrisits]

Re: Need your advice - Customer doesn't pay!

Thanks lpopejoy. I just got back from a meeting with the customer. He faces serious cash flow problems and this is why they haven't paid us so far. As suggested, we're trying to work out a realistic payment arrangement.

[lpopejoy]

Re: Need your advice - Customer doesn't pay!

Sweet way to go. Now just keep communicating with him - if you can help him through this - he's going to love you for the rest of his life (hopefully!) :)

[chrisits]

Re: Need your advice - Customer doesn't pay!

I'm definitely going to try that! Thanks.

[allenc]

Re: Need your advice - Customer doesn't pay!

Try to get payment on Credit Card.
I have gotten several late paying clients under cash flow to pay for major purchases with a credit card. At least you have access to the funds.

[e-ssential]

Re: Need your advice - Customer doesn't pay!

That is very nice of you of keeping him in business, but , that is not going to keep yours. Realize that your business needs cash flow. I am sure that you understand that is the very survival of any small company (specially in with this economy). As a rule of thumb, we always get 50% up front as part of the project (if not more depending on the situation) and the rest is due when the project is finished.
You need to pay your bills my friend, and for the look of your situation with this matter is going to take you another six month to collect. Do this with 10 more customers and you will be in the well fare lines together with friend who owes money :-)
Unless your company has deep pockets then you might as well forget about it. You need to realize that time is money and if I borough $100 from you today and you collect your money in in over six month. The value of that it has been depreciated. That is why banks charge interest. (hint: ask a collection agency how much they charge)
I guess in your case you should either put him on a 90 days payment plan plus interest or just declare it as lost for your income taxes.
I once worked in the headquarter of a modest size business. I walked into the office of the finance controller and found that she was troubled because she had to turned down an employee request to borough money from the company. Her answer was a big NO. I wanted to know why and she replied. if I lend her the money because she doesn't have money to pay her other creditors today. What makes me believe that she is going to pay me and everybody else next month. By the way, the girl asking for the loan was her daughter.
Just my two sense into your situation. Don't mind me. I am a heartless prick who has happens to have a business :-) We always stick to the rules in my company no matter who we are talking about.

[nattivillin]

Re: Need your advice - Customer doesn't pay!

i agree with e-ssential. Everyone has "cash" issues. We have to pay our bills just like our customers has to pay theirs.

Its good that they acknowledge the dept, and you can try to work our payment arrangements. From experience, i wouldn't drag that out too long. After 90 days i would consult a lawyer. The longer you let it go, the less likely you are to be paid. The equipment value is depreciating as well, and it will not be worth as much when do you start a collection attempt.

If this is your first non-paying, i would get some good payment/collection practices in place. Let customers know up front about terms, interest, and collection fees goes a long way.

[Arcadia Computer, Inc.]

Re: Need your advice - Customer doesn't pay!

Don't put the monkey on your back because your customer is having cash problems. Work out a solution and get 50% upfront from now on.

Last year I made the mistake of rushing out to swap out a dead machine for a 'troublesome' person who had always used my competitor. He said he'd have a check ready. When I showed, he was gone and all his customers were looking at me to put the new computer in so they could purchase items and leave (I think you all know what's coming).

He didn't show even after I waited. The next week I walked into his business early in the morning. Smiled at the receptionist, made small talk as I informed her I need to do some 'maintanence' on the new computer. I removed the hard drive, and left with MY computer. The customer called the police and states attorney. After speaking with the police and them speaking with the states attorney, they said I was well within my rights to take the computer. They also stated it was smart to leave the $40 hard drive because if I would have taken that, it would have been stealing as it wasn't my data.

I also made a customer who owed me $1,200 pay me in 12 $100 checks post dated 2 weeks apart from each other before I'd do anymore work for them. Worked like a charm. Feel free to try. These troublesome customers need only make up less than 1% of your customer base at the most!!!

[alex castro]

Re: Need your advice - Customer doesn't pay!

I agree with Arcadia computer, make this a lesson learned. Always charge 50% up front. When I do a job I have all my expenses paid for as far as the server, parts and software so when its time to put the hardware in its final resting place I am a happy business owner and I am also presenting an invoice for exchange of a final payment. I don't NET30 anyone, i need my money now (due on receipt) terms =).

[drlogic]

Re: Need your advice - Customer doesn't pay!

You can have a friendly relationship with customers, but when it comes to money you need to be assertive and clear up front about the rules. Money's money.

It's much easier to be clear at the start about the rules of engagement than trying to assert yourself down the line.

We charge 50% up front on project work, and require payment for hardware up front.

For maintenance contracts customers pay for the month up front, and if they don't pay, they don't get service.

Also, as we're dealing with suppliers for order, returns, etc., we charge 15% on top of the RRP when purchasing on our customers' behalf. If customers wish to save money, we tell them where to order kit, and they buy it themselves.

Don't spend time on customers who don't pay; you may never get the money as they might go bust. Either write it off (and you won't waste your time), or get what you can as quickly as possible.

If it's hardware and they haven't paid, just take it back; make sure that you have terms stating that the kit belongs to you until it's fully paid.

[Lyj_e1]

Re: Need your advice - Customer doesn't pay!

Ditto with Arcadia computer. We learnt some harsh lessons when we first started but now charge 50% upfront. If it is a long term client with cash flow problems, we normally talk to them to arrange a monthly payment scheme.

[therealchriscurtis]

Re: Need your advice - Customer doesn't pay!

I had a customer I did a disaster recovery job for (and a new server install). They ended up owing me 2800 for many months. I was NEVER unprofessional with them and gave them months to pay, but they did not. I spent about $40 to start the process of taking them to small claims court. Once they were served by a deputy for court, they contacted me and paid in full a few days later.

They still call me and have me do work, and now they pay on time. ALWAYS stay professional. It is the best practice in the end.

[natrat]

Re: Need your advice - Customer doesn't pay!

I take full payment up front for any hardware purchases over $400. In four years of this policy I've only had one person question it, every single other person just pays without question.