Don’t threaten to beat deadbeats
When someone doesn’t pay you what you’re owed for the products you make or the service you provide don’t threaten them with bodily harm.
I love that piece of advice from the National Federation of Independent Business.
I know deadbeats can make you want to hit someone, but cooler heads must prevail or you could end up in jail. It’s harder to collect when you’re in the slammer.
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One small business owner Jay Goldberg, owner of Bergino, a company that makes handmade gift baseballs handled his deadbeat perfectly, even though he still hasn’t gotten his money.
A large catalog company based in Missouri since last year has owed him money.
“The irony of this whole thing is when I sell to a little retail shop I have them pay me upfront, but for larger accounts they always get terms,” he says, rethinking his strategy now.
They’re supposed to pay him within 30 days and if they don’t, Goldberg’s typically pretty lenient and gives them another 30 days. After that he starts to follow-up.
He started making calls to the deadbeat company and “right away I got a bad vibe. I made call after call, and then I spoke to a person in charge of accounting. She told me ‘you’ll get your money. Don’t worry.’”
At that point it was 80 days from the time he had delivered his products, and the person in accounting promised him he’d get a check in the next few weeks.
And surprise surprise, the check never came.
Finally, he got in touch with the president of the company who was very nice on the phone, and informed him that the company had been going through some problems. The president told Goldberg he could not pay the whole amount owed because the firm did not have the money.
Goldberg made a deal with the president that included accepting 50 percent of what was owned but he’d have to be paid within 10 days.
Well, weeks went by and, nothing.
The amount he’s owed is $2000. That might not sound like a lot on the surface, but for a small company that’s a big deal.
But the total isn’t enough to justify Goldberg flying to Missouri to sue the deadbeat firm in small claims court.
So, he contacted the Attorney General’s office in Missouri last month and filed a claim.
I called over to the state’s AG’s office and the press secretary there, John Fougere, told me the staff there makes an effort to contact the party that is the target of the complaint. And then they attempt to mediate the issue.
Last year, he says, the office returned $9.3 million to consumers and small businesses through informal mediation, without going to court.
Fougere says the AG’s office tries to get to each complaint as soon as possible, often within a few weeks.
“We encourage consumers or small businesses in the state or anywhere in the U.S. if they have an issue with a business or other entity based here to contact our office,” he stresses.
Not getting money you’re owed is a big problem for small firms. According to the NFIB 65.7 percent of companies report cash flow was a continuing problem, and of those nearly 30 percent say that “difficulty collecting money owned you” was the main reason.
When dealing with a leech advises Steve Strauss, author of “The Small Business Bible”, “If the relationship is already fractured then a small claims case may make sense. It will certainly get their attention. Before that, after playing nice and asking repeatedly and pleasantly to be paid, I might get a lawyer to write a letter. It is business-like and professional, but it will also serve notice that the matter needs attention.”
And some more don’ts from NFIB:
* Calling or communicating with the debtor so frequently that it could be considered harassment.
* Using obscene or abusive language.
* Communicating with the debtor's employer or family members.
Goldberg hasn’t engaged in any of the no nos, but that doesn’t mean he’s not angry. “I’ll keep going. I’m not done with this guy,” he adds.
