Ask HN: lawyer needed for unpaid invoice (NYC)

Wait wait wait wait wait wait wait. Hold up a second. Read 'philiphodgen and 'patio11's comments, but then wait a second.

Two weeks is not a long time to wait for a receivable. I'm sorry to tell you this, and I may get downvoted for pointing it out because HN doesn't like to hear it, but companies can be slow to pay invoices.

We've waited months before!

You should be aware that if you escalate your demands, it might take longer to get paid. It's possible that you are at this moment stuck in some kind of payables limbo, especially if you're dealing with a sizable agency. The accounts payable people at the agency can get you out of that limbo. But if you sue, resolution of your dispute will involve legal, and legal is slower than accounting.

Can you tell us more about the situation you're in? Not why you need the money, but what kind of firm is it that owes you the money? If it's a reasonably big company, the odds of them actually intending to screw you are low; the risk/reward just isn't there. But maybe they're a smaller firm than you made it sound to me.

'hedonist, listen to this advice. It's dead right.

You aren't going to collect this invoice in time to solve your pressing needs. So play the long game that 'tpacek suggests.

My suggestions were made on the assumption that your client is a smaller outfit where the nonpayment is due to, well, a desire to not pay you if they can get away with it.

If you're dealing with BigCo your invoice might be in payables hell. Endless followup is sometimes required. I get banks as clients. Sometimes they're fast. Sometimes they're ridiculously slow in paying.

I totally missed that part. Two weeks is nothing. Even if your invoices are "due upon receipt", most companies will default to net-30 and, as a tiny vendor who is no longer engaged, your invoice will be processed after everyone else.

I have one client who seems to stay right about $250k behind, especially around year-end. It was a little disturbing at first but their AP department just takes its time with these things.

So, for the benefit of everyone reading this: Not urgently needing the money, and not communicating that one urgently needs the money, is one way to avoid having this happen to you.

For your benefit:

a) Asking for partial payment sends a bunch of signals regarding your level of professionalism and need to see this check. Those signals are not helpful in getting you paid in a timely fashion.

b) Two weeks late is practically on time for a lot of clients. Many are just structurally incapable of getting checks cut that fast. Yes, insane, but also true.

c) I'm uncertain of the status of the project and your ongoing relationship with the client. Please note that escalating to lawyers is not in general something which improves client relations, if you wish to get more work from them in the future or if you have an ongoing work relationship for e.g. future milestones.

d) Prior to escalating to a lawyer, write them a short letter yourself and FedEx or courier it to their office. Pay the extra for signature confirmation of receipt. Contents could be similar to:

Dear $DECISIONMAKER:

I invoiced you ($IDENTIFYING_INFORMATION) for $AMOUNT on $PROJECT on $DATE, but to date have not been paid. Last week I spoke to $NAME and $NAME, who promised to handle this issue, but it remains unresolved.

The invoice is due immediately. I would prefer that we resolve this amicably without having to bring lawyers into it. If you have any questions, please call me at $CONTACT_INFO.

Regards,

$YOU

"Asking for partial payment sends a bunch of signals regarding your level of professionalism and need to see this check. Those signals are not helpful in getting you paid in a timely fashion."

Out of curiosity, do you think this also applies to asking for a downpayment for large contracts? Because the same logic seems to apply, but I usually see asking for downpayments talked about in a very positive light.

Asking for a down payment is a test of seriousness and someone's ability to pay the actual, real, full price. It is also an utterly normal business practice. Asking for partial payment because you are broke tells people you are broke. This gives people information about both your business acumen and negotiating position, not information that will redound to your advantage.

I expect milestone payments based on deliverables if the project is fixed bid.

My schedule for invoicing is usually

1) retainer at start of project

2 & 3) milestones 1 and 2, which can be "tech design approval" and "dev complete" or whatever

4) launch or end-of-warranty closeout.

As more of our projects are integration of our software with client systems, 2 and 3 are usually agreement on integration design and entry into integration testing.

I've reduced fixed bid work due to some challenging client circumstances that drove too many change orders (I like about one per week) and have focused more on T&M with a not-to-exceed.

Thanks. It's extremely difficult not to come off sounding desperate when in fact my situation could hardly be worse at the moment (short of being physically evicted from my apartment, or in jail).

But if the situation does not improve soon I'll definitely take your advice into account.

I seem to be posting this link about once a month on HN, but here goes.

http://vimeo.com/22053820 - Mike Monteiro - F*ck You, Pay Me

It's truly worth the listen. But, since there is already spilt milk, I'd advise your letter to include notification of the date by which you will be reporting them to Compunet, dunn and bradstreet, the BBB and whatever trade organizations that they belong to, including their bonding agency (which they might have).

I'm a lawyer. I've written those letters. They're useless. Don't waste your time.

1. If deadbeats have the money and won't pay, the only thing that will move them forward is a lawsuit. Yelling "Scary Monsters!" will not budge a normal business executive. They are acting in bad faith. A letter won't change that. You can't bullshit a bullshitter, etc.

2. If they don't have the money, they are either good people or they are bad people.

(a) If they are good people they would have said "We don't have the money and here's a payment plan." You personally should make the payment demand and see if they offer monthly payments to pay you off. A lawyer's snarling letter is going to hamper this effort, not help.

(b) If they are bad people, the only thing that is going to do you any good is a lawsuit.

Your action plan is simple. You either decide to make one last collection effort or you don't. I recommend that you do so. I recommend that you do so on paper. Send a letter with the unpaid invoice. You want this proof so you look good in the litigation, not because they are suddenly going to wake up and pay you.

Then you sue. I don't know what the NYC rules are for small claims court, but that's where you go. You don't need a lawyer there.

For instance, if they owe you $10,000 but the maximum you can sue for in small claims court is $7,500, sue for $7,500 and take the haircut. You don't have to be afraid of the process. It's simple. "Hey Judge, here's my contract where they promised to pay me. Here's the work I did. Here's where they said they were happy with the work I did. Here are the things I tried to do so they would pay me. I ain't got nuttin' yet. Your Honor, I rest my case." Then the Judge will look at them with a Judge Judy-style look and say, in legalese, "WTF?" And they'll have a chance to explain themselves.

No decent lawyer will take on a tiny case like this. No decent lawyer will take on a tiny case like this for the promise of future payment. You're on your own.

Here's the blunt truth. Invoices like yours are worth the face value multiplied by the probability of payment. At the moment your probability approaches zero. You don't have something worth $10,000 to you. You, in fact, have a claim for money that is probably worth zero or close to it, by the time you put all of the time and effort into collection.

Mentally kiss this money goodbye. Put the minimum amount of effort into collection that you can -- use the model I have described above. Put your effort into doing things better next time.

Never put yourself in this position again. There have been endless threads on HN about this. Look for comments by tptacek and patio11, among others.

My personal feeling is that as soon as someone owes you about $1,500 or so (or pick your number), the balance of power shifts from the service provider to the customer. Pick a number where you can look at the customer, swear with all the potty-mouth words you know, and walk away. Then never let your accounts receivable get above that number. It's better to not work and not get paid than it is to work and not get paid.

I agree with many of these points, especially about not letting accounts receivable get more than $1-2k, and about having to settle for a fraction of the outstanding $10k in this case, but I do not agree about a lawyer not being willing to take this case or it not being worth it.

Many lawyers will take a small claims case, and at the very least will consult with you (probably 30-60 minutes for free) about it. And while state law will vary, around here most will work for a percentage of the awarded payment.

I knew someone that had a $12k invoice due, went to small claims court ($10k limit), had a lawyer write letters and represent them, and walk away with $8000+. Bear in mind it took 2 years to resolve, though.

Small claims courts often have favorable laws governing venue. In California it can be especially onerous (for the defendant) but I believe New York has a similar arrangement. You may be able to file in your county/city, which, if it differs from your client's, creates an additional perceived cost of fighting the claim.

However, one thing to keep in mind is that even when you win, you still have to collect. It's just "easier" to collect (or sell the debt at even more of a discount) when a judge or arbitrator has evaluated your case and ruled in your favor.

You should have some terms associated with your invoices. Don't be afraid to start invoicing for the additional 1.5% or whatever per month after your invoice term has passed.

I'd recommend doing the least possible and getting another engagement ASAP. Spending time on this is going to reduce your effective hourly rate as well as cost you the opportunity to earn income from a paying client. If you can't spend a few hundred on a bad lawyer printing out a Nolo Press form letter, your financial situation is dire enough that you need to focus on getting billable hours.

The 'Fuck You, Pay Me' session (https://vimeo.com/22053820) is worth watching to prepare yourself for engagements going forward. You still should invest in an attorney, but at the start of the engagement, when everyone is still in love.

Not that this takes away anything from what you've said, but $5000.00 is the limit in NY.

Depressing, but helpful and sobering advice.

Thanks for the detailed response.

Send them a cake invoice. Go to a bakery, have them decorate a cake just like your invoice, in red icing at the bottom "your invoice is past due, $10K due immediately". Have it sent to their receptionist. Everyone loves cake. The owner will be embarrassed as hell and pay up immediately if they can. The last thing they need is their employees wondering if they're solvent.

If they still don't pay, send another cake invoice, but instead of putting frosting on a cake, put frosting on a cardboard box.

I've had a friend use this three times. Two paid immediately. The third got the cardboard box invoice. All cheaper than an attorney.

If that doesn't work, perhaps a singing telegram?

Hope they pay you soon.

In my industry I would deliver stuff, holding last bit in evaluation mode or in watermark mode due upon full payment.

That's of course prevention measure. If you already gave up whole piece of work for them to ran away with - then you're in chasing mode.

Forgetful clients next time will get preferential treatment - 100% advance payment requirement.

You may want to send another invoice, followed by a "demand for payment" letter a couple of weeks later, prior to hiring a lawyer, especially since they aren't yet 30 days out.

Actually they are 30+ out, already.