Stiffed?

One of my former clients disengaged and terminated right before the 5/17 deadline after being MIA for a couple of months.

Per the terms of my engagement letter, and per this client's request I billed out for time accrued up to the time of termination.

My one mistake was to take my time billing for this....I should have billed same day, but I took my time and billed out almost a month later. This former client has not paid yet....it's been about two weeks and one reminder email to pay since the original invoice. The payment was due on receipt. I know the person has seen and opened the invoice email, QBO invoicing gives me that level of detail.

Eventually I'll be calling and leaving a voicemail, as well as sending a paper invoice certified to the former client's address.

But...if this former client doesn't pay, what would you do? The bill is low three figures, and while part of me realizes it's not really worth my time to see this through small claims court and is cautious that doing so might affect my image, the other part of me hates to not collect all invoices and hates that writing this off would be positively reinforcing negative behavior.

...writing this off would be positively reinforcing negative behavior.

For a former client? What behavior do you expect to follow this reinforcement?

For a bill in the hundreds, I wouldn't bother. If there are no collateral relationship dynamics, I might send it to a collections agency to see if I can get 10-30% of it eventually.

I have one to collect that is ~$12K. It predated me at my new firm, but I'm not willing to let the firm write it off. My business partner was about to and I said 'no'. I'd probably draw the line at $3K or so to generate any activity on my part more than handing it off to collections. I wouldn't even do that if there were other relationships that person might sour for me that would cost me more.

You can send a ten day demand letter. I did it once and it worked. This was a client who hadn't filed in over ten years nor paid estimated taxes so i think the threat of legal action scared her.

Is a negative Yelp/Google review worth the $$$?
Likely the client or the new tax preparer will need something from you, that is your change to get paid.
Ask your former client - "does you new CPA know that you are not honoring your obligations"?
Do the credit reporting agencies?
Do you value your FICO Credit Score?

I really don't care about Yelp or Google reviews anyways so I would be pursuing "all" collection efforts if the bill is high three figures. If it was say less than $500 and t would cost you about that much to go to small claims/attorney fees and collection hassles then you may think about it.

I have had pissed off ex-clients threaten to give a negative review and I tell them go right ahead and I will be pursuing all legal avenues if it is defamation in my opinion. So you better tell the truth

One of my former clients disengaged and terminated right before the 5/17 deadline after being MIA for a couple of months.

Per the terms of my engagement letter, and per this client's request I billed out for time accrued up to the time of termination.

My one mistake was to take my time billing for this....I should have billed same day, but I took my time and billed out almost a month later. This former client has not paid yet....it's been about two weeks and one reminder email to pay since the original invoice. The payment was due on receipt. I know the person has seen and opened the invoice email, QBO invoicing gives me that level of detail.

Eventually I'll be calling and leaving a voicemail, as well as sending a paper invoice certified to the former client's address.

But...if this former client doesn't pay, what would you do? The bill is low three figures, and while part of me realizes it's not really worth my time to see this through small claims court and is cautious that doing so might affect my image, the other part of me hates to not collect all invoices and hates that writing this off would be positively reinforcing negative behavior.

Was there a deliverable? Did you do his tax return??? Every now and then this happens. With no deliverable, I simply would write it off. If I did the tax return I'd threaten with a collection agency etc. BUT I have never sent anything to collections. I have learned that this is simply the price we pay and if it is less than 1/2 percent of sales, and it happens once in a blue moon, I move on.

Screening clients, learning of their behavior, getting deposits etc.... all things we should be doing.

I would write the client and mention that you worked hard for him and you expect to get paid for it and he should do the right thing and pay you for it. It's not like he's stiffing Walmart. How would he like it to work for hours and not get paid?

Then I would send my normal polite reminders, then I would totally drop it.

Plus, you have an advantage here. You owe this client NOTHING! You are "free". Sometimes, I'm hoping a client won't pay me for this reason. Bye bye.

As long as your stiffs are less than 1% of your gross, why lose sleep over it?

If they are more than 1%, then something's wrong - but I doubt that when it comes to MvT or most posters on this board, because we are the thoughtful type to begin with when it comes to selecting and working with clients.

I bet MvT's stiffs are more like 0.1% of his gross. Am I right?

Just playing devil's advocate here, but you took a month to send the invoice, and it's only been 2 weeks since the invoice was sent. I also hate to be stiffed, to the point that I've gone and stood in a former clients business office until they gave me a check, but that was also $3k.
I would give it 30 days, and then send another invoice with interest. Then just keep on tacking on the interest every 30 days until it reaches the small claims max, and then at least it will be worth your time to pursue.

But then again, all that time to access interest, and send monthly invoices.
Probably easier to just walk away... but sometimes there is some satisfaction in being a PITA until you get paid.

Give it another couple weeks and revisit after you've had time to fully process.

Move forward. You can earn more money by addressing existing and new clients than by whatever you will collect from this one.

I have one client that owes me around $14k. I knew going in there was a high chance I would not ever receive the money. It started at around $20k, so I guess that is "good" but they think $500-1,000 a couple of times per year suffices. While I certainly am not going to accrue more time that gets me back to $20k or higher, I also will not pursue the money if I do end up being stiffed, but I will make it known, including to his wife, why I will ultimately disengage from their business and thus also personally.

Most CPAs will not sue clients or heavily pursue collections--know your tolerance and cease services at that time. There is a local CPA that sues everyone, including clients, left and right. He has an absolutely horrible reputation and I sure as hell do not wish to conduct myself like him.

I got stiffed $5.5k....by the son of one of my largest clients. I was naive in expecting that he would pay up, and I should have billed more frequently. Total stiffed in 3+ decades = $6k. Irritating, but not material. My advice: move on.

Thanks everyone for taking the time to post. I read everyone's responses and took them all to heart.

Relevant: https://youtu.be/78-4RobJQ0Y?t=67

My dad was an electrician and always got his solicitor to send a letter. He only had to go to court twice. I think it may have helped that, the first time, the dead-beat was a household name in Scotland and we lived in a rural county where everyone read the local newspaper and that newspaper invariably had the court reports from the last week.

With other cases, I think it helped that word got around, whether it went to court or not. Those were the days before we had the small claims procedure in Scotland.

Keep in mind that the professional liability insurance carriers try to dissuade the insured from suing due to the risk of the client counter suing for malpractice regardless of whether any malpractice occurred. It's very frustrating not to sue when you know you haven't committed malpractice. For this reason, I would strongly consider if the client would have a case and I'd also consider not suing, in any event, if the amount is not more than a few hundred dollars.

I think I have briefly mentioned how much money the first firm I worked under was screwed out of by unscrupulous clients. It was not that we failed at anything, but the owner allowed clients to walk all over him (and yes, if you recall any part of my history, you will recall the owner was my dad). He lost six figures of EARNED INCOME to unscrupulous, POS clients that always promised the world but did not actually have a pot to **** in. I knew if I ever owned my own businesses, I would not allow ANYONE to walk all over me.

I require retainers or nonrefundable deposits, even from long-time clients and ones I know DO pay quite timely. There is one exception which I already mentioned, and I have told why I have allowed it to occur in other threads.

But like we are all saying, and as insurance carriers will suggest, do not sue. Do not push the matter. Move on. You will make more money and have less stress in your life. Our industry has still not sufficiently evolved and this is certainly one of the topics that requires not an evolution but a revolution.

I’d sue his pants off. Sometimes you’ll get paid before you even go to trial. But if not, it’s kind of fun and is good experience. But be prepared. You have one shot at it, so bring your evidence. In addition, you have to question the defendant. So practice a little beforehand. You can’t have a conversation, you have to ask questions. It really is great fun. I had the court listeners in stiches one time with all the dumbass questions I was asking. We do it all the time. “Our firm sent you a bill dated x/x/2019, did you receive the bill?” “Ok, you received our bill. Did you pay it? Did you contact us to dispute it?” “We also sent you an engagement letter, which you signed, is that your signature?” Ok, so let me get this straight, we sent you a bill that you received, but didn’t dispute, but also didn’t pay it, even though you signed an engagement letter that said you would pay it, is that right?”

Had an attorney call me a few weeks ago asking to release our judgement lien from his client’s house. Client was selling his house. I said, “Why?” Attorney said, “Because you got paid.” I said, “No we didn’t.” We had a check that afternoon.

Another time, the guy owed like $2k. Went to trial and we asked for punitive damages, up to the max allowed for Small Claims. The judge, which was really just a magistrate, said, “I’m not so sure you can sue for punitive damages.” I said, “Why not?” Judge eventually allowed it.

Another time, we sued an LLC. I told the judge the 2 owners personally guaranteed the bill. The judge scoffed. I presented an email, from one of the partners, that said, “Since the LLC is defunct, me and Bozo agree to pay your bill one-half each.” The judge allowed it.

Sounds like you need to increase your client quality control and payment policies, Jeff-Ohio.

My practices have resulted in me "potentially" being out under 1% of my gross revenue since I started my company. Not worth the time or effort to pursue even if I am ultimately not paid.

I believe Jeff is being tongue in cheek.

I say this at the risk of being sued.

I say this at the risk of being sued.

LMAO. Good one...

Sounds like you need to increase your client quality control and payment policies, Jeff-Ohio.

You’ve falsely assumed that our firm’s potential bad debt level is higher than the industry average, or even higher than yours. The fact is, you have no idea about our firm’s level of potential bad debts, in terms of pure dollar amount or a percentage of billings. Thus, your comment is misplaced. I’ve only commented on the actions we take when certain bills go unpaid.

You yourself admit you’ve been stiffed. And so has everyone else that posted to this thread. The only difference between our firm and everyone else posting here is that we’re not afraid to sue to get paid. We’re kinda like Wal-mart here. Some stores will just settle the fake slip-and-fall claims. But not Wal-mart. They fight everything, including tax cases, like the one in Puerto Rico.

I believe Jeff is being tongue in cheek.

A little bit. But if you want honest feedback, that’s what you’re getting from me. There is a continuum here. If you don’t want to spend a lot of time on it, for whatever reason, but are willing to spend some time on it, then just file the suit and pay the small fee. Sometimes, this does the trick. And if it doesn’t do the trick, you can leave it at that if you so choose. Or, do nothing and let it slide. We do that sometimes.

and is cautious that doing so might affect my image, the other part of me hates to not collect all invoices and hates that writing this off would be positively reinforcing negative behavior.

The “image” thing isn’t a great factor in my view. The fact is, you have a guy you did work for and he didn’t pay. If some “associate” of yours (another client, a banker, a friend, whatever) finds out about it and someone looks unfavorably upon you, I would question their belief system.

One time we had a guy that made hundreds of thousands of dollars a year. A big timer in NYC. We prepared his return. Later had to amend it because of a bunch 1099’s he didn’t provide to us, even though we asked about it. He didn’t want to pay for the amended return we did (or maybe it was a response to a CP2000, I can’t remember). In any case, we’d call his office and say, “Hi, I’m looking for Frank to talk about his unpaid invoice.” They’d put us in voicemail or whatever half the time. But we kept calling. Eventually he broke down and paid, once he realized there were people in his office wondering about this invoice he refused to pay.