How do I get a deadbeat client to pay their invoice?

July 30, 2008 2:29 PM

Company still hasn't paid my invoice, what recourse do I have?

I worked for a small startup as a software engineer for about a month's time. One day they decide to tell all of its employees that they will shut down for a week because of financial difficulties.

The company is open again but with about a 75% reduction in head count. They are now not paying my invoice for the work that I did before the shut down.

What can I do? Some one told me to file a complaint with the labor board. How do I go about doing this? What is the best way get remunerated for my time and energy spent doing work for them?

Also, I'm assuming the reduction in workforce has left a lot of empty Aeron chairs and computers. Should I asked to be paid in chairs and computers instead? I could use a new Mac right about now.

posted by zzztimbo to work & money (12 comments total)

If you invoiced them, you almost certainly were not an employee, so the labor board doesn't sound right. An unpaid invoice should be pursued in small claims court. It costs maybe $20 to do the paperwork yourself.

Though your Aeron and Mac idea is a nice compromise, if you're serious. But first file the claim. Then they'll take your concern seriously, and if you choose to settle, fine.
posted by rokusan at 2:41 PM on July 30, 2008

Lawyer up. Sorry.
posted by aramaic at 2:48 PM on July 30, 2008

...being unusually dense, it's only now occurred to me that I should elaborate. Anyway, my actual point was that you may wish to consider having a lawyer draft a brief threatening letter. It will cost more than filing in small-claims, but it may result in less work for you (which, if you're freelancing, costs you money).

So: get a lawyer to send a threatening letter, which has a specific deadline in it. If/when they fail to respond by the deadline, then file in small-claims (as noted above, you can do this yourself).
posted by aramaic at 2:52 PM on July 30, 2008

The one time I was dealing with a slow-pay and dodgy-seeming client, I sent them a note informing them that I would be handing the invoice over to a collections agency (and I started calling collections agencies, to find out what I'd have to do).

The check came by overnight express the next day.
posted by adamrice at 2:53 PM on July 30, 2008

Have they actually informed you of their intent to not pay the invoice? Or are they just not answering your calls?

Were you working as an employee or as a freelancer / contractor? ("labor board" implies you were an employee; "invoice" implies you weren't, so I'm not sure what you're describing.)

If you were freelancing, do you have a contract? Anything on paper? Any evidence that they agreed to pay such-and-such amount for thus-and-such work, and that you performed that work?

Assuming you were freelancing -- since that's the only area I have any experience in -- and that you do have some physical evidence that you're owed the money, the best recourse is to keep calling, or even visit in person, until you get someone to either promise payment or to tell you they don't plan to pay. Forget about email, it's too easy to ignore.

If that doesn't work, as a last resort you can hire a collections agency. They take a hefty cut -- like about half -- but it's better than nothing, and they do seem to get results. Get your ducks in a row with the agency first, but give the client one last chance before you pull the trigger: two times out of three, when I've left that last phone message saying "You'll be hearing from Joe at XYZ collections agency if I don't hear from you by Friday" I got a return call within five minutes. An angry call, but they did pay up.

I've never gone the small claims or lawyering-up route, so have no advice there.

In any case, don't ask for payment in chairs and computers unless you're really desperate; it marks you as an amateur and you're likely to get screwed.
posted by ook at 2:54 PM on July 30, 2008

(And yeah, by "get your ducks in a row" I mean call around, decide which agency you're going to hire, know what you're doing -- don't just threaten RARR IM GONNA GIT YOU before you know what you're getting into. Based on my handful of experiences, collections agencies are extremely polite and easy to deal with, when you're the one who wants to do the collecting.)
posted by ook at 2:58 PM on July 30, 2008

To clarify, I was hired as a consultant and not as an employee.
posted by zzztimbo at 3:37 PM on July 30, 2008

give them a call and nicely but firmly make clear that you need to establish a date for when you can expect payment. make it clear that more than seven business days is not acceptable and that you will seek legal representation at that time.

this company is obviously very close to going under. don't delay acting or you may very well end up holding the bucket.
posted by krautland at 4:15 PM on July 30, 2008

Check to see if the amount is too large for Small Claims Court. However, even if you get a judgment against them, you still have to collect.

Call your contact there, explain that you understand things are difficult, and ask for the name and extension of a staff member in accounts payable. Call this person and ask if your invoice has been cleared for payment, or is in a pile waiting to be paid, or if it's lost. If lost, re-invoice. If cleared for payment, how long until payment? If in a big pile, what's the expected date of payment?

Keep in mind this person can give you info, might be able to get your check paid, and is not responsible for the mess, so be very nice. If this person gets you paid, send chocolates. In the company I worked for that went through a dicey patch, the accounting team were treated like crap, and responded well to simple human courtesy, which was surprisingly rare. Persistence and charm often work.

The company may be getting ready to go into bankruptcy, where you would be one of X number of creditors who will share a small payout. If you can get paid before they declare bankruptcy, you will be much better off.
posted by theora55 at 4:21 PM on July 30, 2008 [1 favorite]

Collection agencies have no magic powers to force people to pay bills. They don't sue (unless this is a collection agency that includes attorneys). They mainly harass, which is useless with a small company in trouble.

Go with theora55's advice and the others who advise conciliation, letters and ultimately a lawsuit (pref. in small claims).
posted by JimN2TAW at 9:51 PM on July 30, 2008

Small claims court also has no magic powers to force people to pay bills; even if you win, the court will "assist" (by issuing subpoenas to help you locate their assets, for example) but will not collect the money on your behalf; you're still basically responsible for collecting the payment yourself.

I haven't used small claims personally, but again, in two of the three cases I've resorted to collections agencies, the mere mention of the fact that I was planning to was enough to get payment in full immediately without me even having to hire the agency; the third one took longer but eventually got the job done.

So, yeah, they harass. In my experience, it's pretty effective, even with small companies in trouble. IMHO it's well worth it as a last resort.

(I agree that theora55's advice is excellent, though, as something to try before that last resort.)
posted by ook at 1:49 PM on July 31, 2008

I was once owed a significant amount of money by a freelance client that got bought by another company, which stopped paying all previous creditors. I had the lawyers sent several threatening letters, and then draft a complaint which would have been filed in court. When the company received the complaint, they finally paid up. This took 9 months., however, and they were not on the verge of going bankrupt. In your case, since this is a startup that is probably going to go out of business, I think your idea of getting paid in computers or chairs might be a good one, because if the company declares bankruptcy, you'll just be one of many creditors, and it will take forever to get whatever payout is left for you, which may be zero.
posted by lsemel at 10:32 PM on August 2, 2008