Compliments of Robert Goldhaber, Esq. -Member of the National Network of Accountants' Preferred Provider Network
The key to staying in business is receiving payment for the services you provide, and receiving that payment in a timely manner. In most instances, getting paid for services performed, or for goods sold, is not a problem. But what do you do when payments are not forthcoming?
Do You Want to Do Business with this Customer?
In reality, every businessperson should start thinking about being paid prior to performing any work or selling any goods. Obtaining a $100,000 contract means nothing if the work is completed but payment is not received. Just because a prospective customer wants your company or firm to perform services for him does not mean that it should be done without payment in advance. If they will not pay in advance, you must first determine whether this customer will be able to pay in the future.
First, ask questions. Who is this customer? Have you done business with them before? If not, what type of business entity are they - corporation, partnership, proprietorship, LLC? Where are they located? Will the owners of the company personally guarantee the company's obligations to you? Do they have good credit?
Next, do some research. Where does the prospective company do its banking? Get permission and call the bank to find out what their balances are. What do their trade references have to say about them? Are they fast payers? Do they always question bills? A great deal can be learned about the payment habits solely by checking a companies trade references.
All of this information should be used to determine whether doing business with this customer will be profitable or a problem. None of us, no matter what profession, wants to be chasing clients or customers for payment.
The Terms of Doing Business
Once these facts are determined and your firm wants to conduct business with this customer, the terms in which business will be done should be clearly defined. These terms must include when payments are due. In sales, it is common practice to list the terms and conditions of sale and present them to the purchaser prior to the delivery of the goods. The common practice among professionals is to list all of terms in a retainer agreement. Here the rights and obligations of both parties should be clearly defined, in writing, prior to commencing the relationship.
What Do You Do if You Are Not Paid in a Timely Manner?
Once a sale is made or services are rendered, how long should a firm wait for payment?
Most companies have their own procedures to deal with this situation. Some companies are effective in obtaining prompt payments from past-due accounts, but most are not. If a customer has not paid according to the terms of their agreement, they should be contacted immediately, by telephone and in writing. The longer an account goes without payment, the less profit your firm or company will realize. The account may provide you with a tale of woe seeking to obtain a lengthy extension. Depending upon the custom and practice in your profession, your individual business practices, and your desire to be paid, it must determined if you are going to extend the client's time to pay, or if it is time to bring in the professionals.
The Role of an Attorney in Obtaining Payment
The attorney can be, and should be, involved in helping obtain payment from late and delinquent customers. The attorney will be able to properly draft documents to enable you to get paid according to your terms. Attorneys can complete forms for use in obtaining information on your customers (i.e. credit applications); draft terms and conditions of sale or retainer agreements; design forms to help obtain security for the debt such as personal guarantees, promissory notes, mortgages, etc.
The attorney is also very important in assisting to obtain payment, should a customer not pay according to the terms of the agreement. Whether telephoning the debtor, sending demand letters or commencing litigation, utilizing an attorney for these services can be very effective. In some cases just the fact that you have an attorney working for you will expedite payment.
This article has been provided by Robert Goldhaber, Esq. of Rosenthal & Goldhaber, P.C., member of the National Network of Accountants' Preferred Provider Network.
Rosenthal & Goldhaber, P.C., located in Farmingdale offers comprehensive legal services. For more information about Robert Goldhaber or the firm of Rosenthal & Goldhaber, P.C., contact him at (516) 249-2468 or via e-mail Robert Goldhaber
The National Network of Accountants is a leader in the training and development of programs for accountants in the field of personal financial planning and assisting business professionals to develop relationships with accountants. For additional information about the National Network of Accountants go to NNPLAN, or call (800) 234-PLAN (7526).