Then "Alice" called.
The wife of a client I had served in a small matter several years
earlier, she had an urgent situation: she needed to sell her business.
By Monday. Forget the fact that there would be all manner of due
diligence, getting familiar with the transaction, creating the sales
documents, complying with the Bulk Sales Law...and sacrificing the
weekend. She grumbled at the rates I quoted. She couldn't understand why
I would insist on a written engagement letter (a/k/a a contract) - don't
I trust her? And when she got the letter, which specified a partial
up-front payment, she went ballistic. "I do business with some of the
largest law firms in the city and they don't treat me like this. The
only reason I'm using you is because my husband used you several years
ago. I could go anywhere!" I paused, calmly took a deep breath, and
said, "Frankly, I think you should." She uttered an expletive, demanded
that I do something physically impossible with myself, and hung up the
phone.
"Alice" was
instructive for me because I clearly saw the signs of how this
relationship could be rife with problems. And difficult relationships
often manifest in deadbeat behavior.
Seeing the Signs
Alice had several
behavior patterns that made my "deadbeat meter" (my gut) go off the
charts. First, she acted the tyrant by trying to demean me ("The only
reason I'm using you..."). Bullying has no place between people who
intend to do business honorably. Also, her demands made no (common)
sense: who wakes up on a Thursday and needs to sell a business by
Monday? The timeframe alone made me suspicious that there might be
something underhanded going on, in which case, I wanted no part of it.
Her grumbling about my rates made the relationship start on a note of
dissatisfaction - hers. I would have constantly had to prove my worth to
her (with only dim hopes of success). All the manipulation would do is
add tension to the client relationship. And finally, she bristled at my
wanting terms in writing, which indicated that she did not want to be
held accountable. Which is precisely what I needed her to be, given that
we had had no prior relationship, and in light of the urgency of the
work she needed.
Prevention
Obviously, the best
way to deal with deadbeats is "abstinence" - don't take them on in the
first place. Your productivity and success will depend on your ability
to pre-screen them. Trying to collect on a delinquent debt is rarely
profitable- in any sense. Financial exigencies can, however, get the
better of us, or something happens during the course of the
relationship, and we find ourselves facing nonpayment. What steps can we
take, short of taking them to Court?
1.
Don't
let outstanding invoices fester. If a client has an outstanding invoice,
don't wait before trying to sort out the situation. Act immediately. The
sooner you address the situation, the less it will loom - in your mind
or your client's - as a major problem (from which people either run or
stick their heads in the sand).
2.
Keep
communication open. Many non-payment situations arise because there was
"a failure to communicate." Maybe you didn't understand what the client
needed and, therefore, the client is unhappy with your service. Perhaps
you weren't clear on how and when you needed to be paid. Be open to the
possibility that you failed to meet expectations.
3.
Keep
working toward a solution. The saying goes, "The customer is always
right." Which is not to say that the customer is always in the right.
Hear them out. Arrange for face-to-face meetings with clients, when you
can. And don't fight what they say. Try to move the process toward
resolution by asking, "What might help you to feel satisfied?"
4.
Have
options ready. Keep your mind open and nimble by thinking of options
other than "full payment of the outstanding balance all at once." Maybe
a payment plan would help. Maybe you need to reduce the amount of the
invoice. Maybe you need to redo the work first. Your goal is to get paid
and, ideally, to preserve the relationship.
5.
Put it
in writing. You should document whatever arrangement you and the client
agree to, so that you can avoid misunderstandings going forward. And
don't let a client's verbal promises of payment deter you from sending
out follow-up collection letters. Keep a record of all payment reminders
- letters, faxes, e-mails - that you have sent. These will provide an
invaluable "paper trail" in the event that you need to take more drastic
measures, such as bringing in a collection agency or a lawyer.
Finally, once the
client has paid the outstanding amount, the matter - and the headache -
has come to an end. Take the high road. Say "thank you" and send a note
to that effect. Even something as simple as "Thank you for your payment
of $___. Our invoice is now paid in full. We appreciate the opportunity
to be of service." You may screen this client differently next time,
raise your fees, have different payment terms, or refuse to perform any
more work for this client, but it doesn't hurt to act graciously now.
Doing so - despite the bother you encountered - will be a sure way to
earn your clients' appreciation and to turn future deadbeats into doves.
©
2004 Paltrowitz & Kaufman LLP. Nina Kaufman is a founding partner of
award-winning Paltrowitz & Kaufman LLP,
www.palkauf.com, a boutique New
York City law firm that acts as outsourced general counsel to
entrepreneurs and small businesses.
