Getting Paid: How to Handle Accounts Receivable 3

Reprinted with permission from Janet Attard* Copyright 2004. All rights reserved.
     
I don't want to be bothered going to court because of the amount of time it will take. Would it do any good just to send a letter telling the company I'll sue if they don't pay?

No, you can't do that. Threatening to sue a company (or a consumer) when you have no intention of doing so could cause you to be sued yourself. If you are unsure of what you can and can't do to legally collect from your customers, ask an attorney for advice. For a relatively small fee, you could save yourself a bundle if the advice prevents you from getting sued or helps you collect debts.

Should I sue if I can't sue in small claims court?

That's another sticky situation for very small businesses. Unfortunately, in some cases, despite the loss of the income, the most practical thing to do is accept the loss and go about your business. Unless the company owes you a lot of money and you could recoup your costs of suing, legal and court costs and the time you have to devote to the lawsuit may make it impractical for you to sue. Your best bet in a situation like this is to ask your attorney for advice and consider all possible outcomes before making your decision. Remember, too, that should you win and your customer can't pay, your victory will be a very expensive one.

The company claims I didn't do part of the job so they aren't going to pay me. What can I do?

The first thing you should do is sit down and talk to your contact at the company to determine the cause of the misunderstanding. If you had a contract to perform the work, ask them to pinpoint how the company thinks you failed to live up to your responsibilities. If the problem revolves around a misunderstanding over terms in the contract or over the nature of the work to be delivered, see if you can work out an equitable solution. If not, discuss whether the company might make partial payment (if you are willing to accept partial payment) in settlement of the contract.

If you can't work out your differences, you will have to sue the company if you want to collect the money you are owed. If the amount is larger than the maximum claim allowed in small claims court, the cost of your legal fees might make the lawsuit impractical to pursue. Thus, if you can reach any kind of compromise with the company, you are likely to come out ahead. (You will also learn, albeit the hard way, to make sure your contracts let the customer know exactly what you will and won't do for your fee.)

Do I have to have a written contract with my customers to get paid?

Under something known as the Uniform Commercial Code (UCC), contracts for the sale of goods worth $500 or more must be in writing to be legally enforceable. (Items you can move or ship are generally considered "goods.") Although personal services and goods valued under $500 are not covered by that law, it is always a good idea to get contracts in writing. Without a written document there is generally no way to prove whose version is correct if a dispute arises.

How should I go about notifying people that their account is past due?

It would be a good idea to develop a series of letters notifying the customer of the past due amount and requesting payment. Each of these letters should be slightly more emphatic than the previous one about the importance of paying the past due amount now.

If you send out computer-generated statements, the reminder could be printed directly on the statement instead of being mailed as a separate letter. If you use multipart forms, an alternative to a form letter might be to put a sticker saying essentially the same thing as the form letter on a copy of the original bill and mail it to the customer. Still another alternative (a little less friendly, though) is to send the customer a copy of the original bill and, using a rubber stamp, mark it "Past Due."
   
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