hospitalitystyle.com

(December 2009) posted on Mon Dec 14, 2009 EST

The second part of our series on billings and collections outlines your options when slow pay becomes no pay.

Tweet

By Bob Staed

• 

In any economy, but particularly in this one, not every client will pay his/her bill. You have to take action if you want to keep paying yours, but which avenue will get you the result you want? A clearly structured collections strategy takes away the risk of under- or over-reaction and charts the right course for minimizing costly write-offs.

Check and Recheck

Before you do anything else, get your facts in order. Identify someone in your firm who's not emotionally invested in the issue to conduct an internal investigation. Check the client's file to make sure your project manager followed the proper billing procedures and documented both discussions and missed payment deadlines. Confirm that no payment was made.

Then, have your investigator talk with the client. Was there something your project manager missed? Is the client saying something different about satisfaction with your services or about his/her financial situation? If the client changes his/her story, be prepared to show the documentation (hopefully countersigned by the client) that states the client was satisfied with the firm's services and that nonpayment was due to a financial issue, nothing more.

Even the best communication and documentation won't always get a client to pay the bill. At that point your options include:

· Negotiate a settlement

· Hire a professional collector

· Sue for payment

· File a lien

· Accept that payment will not be received and write off the debt

Negotiated Settlements

Depending on the circumstances, you may decide to accept a discounted lump sum or allow for a payment plan or deferred payments. If you choose the latter, insist on a promissory note and, possibly, a release from any other issues known to date.

Consider tying the promissory note to a date. For example, you could require that the client will pay a given percentage when the project opens. This may be the best option for clients who don't have the financial resources to make payments now. But make sure you have a written commitment from the client confirming his/her understanding that the money is due and that he/she promises to the pay the bill, perhaps in installments, over a specified period.

Professional Collectors