It’s Just Business, Right?

Imagine you are a professional who has just dedicated six weeks to completing a project with a very tight deadline. For many of us, that is our everyday reality; no imagination required. Now, imagine that you have a colleague working side by side with you on the project; the two of you worked hard, but had a lot of laughs collaborating to do creative work, fast. Are you with me so far?
female colleaguesNow it’s time to stretch your imagination. Imagine that the company who hired you doesn’t pay you or your colleague for the work.

This is what happened to my partner and I last year when my company was hired to design leadership courses. I brought in a partner to work with me, and after 6 months, my company had only been reimbursed for 20% of the fee due.

As the business owner, I made the decision to pay my project partner, though I had not been paid. Since we had a signed contract, my business ethics determined that I needed to honor it, as I expect my contracts to be honored. However, honor doesn’t pay the bills, and I needed to figure out what to do next.

Lessons Learned

Asking to be paid is not fun. No one likes to ask for money that is owed, but when you’ve done the work, and even been praised for it, you have to ask the organization to honor the commitment. Do it in writing, by phone, and even better, in person.

Keep your cool. As a professional, you expect others to act professionally. You’ve got a signed contract, and you did the work, and the company is telling you they “want to pay you, but they can’t right now.”

When it comes to money, it is hard to be patient, especially since you have invested time and money to do the work. Now add in the fact that you took this additional project just so you could afford to take your kids on vacation…well, you can see where tempers might flare after waiting over 3 months. Instead of flying off the handle, I did some research on Google, under “debt collections, small business.” The most important two tips I found suggested that it is crucial to always remain professional, non-threating, and to set up a payment plan.

When it comes to money, it is hard to be patient, especially since you have invested time and money to do the work. Now add in the fact that you took this additional project just so you could afford to take your kids on vacation…well, you can see where tempers might flare after waiting over 3 months. Instead of flying off the handle, I did some research on Google, under “debt collections, small business.” The most important two tips I found suggested that it is crucial to always remain professional, non-threating, and to set up a payment plan.

Follow up on your plan. If you set a plan for payment with your client, be sure to follow up on it. When I was waiting for payment of my first invoice, I made the mistake of waiting until it was almost 30 days late before inquiring. After all, I didn’t want to seem pushy. My sister-in-law, who happens to work as a debt collector, advised, “Don’t wait. The likelihood of payment after 90 days late goes down by over 50%.” So, follow up. When you have a contract with an organization, expect that they will honor it, and if they don’t, follow up to resolve the issue.

When all else fails, seek legal help. I’d never experienced this sort of thing before. I was, quite frankly, at a loss that an organization would not honor a signed, written agreement. After the company refused to set up a payment plan that “they might not be able to meet,” I talked to my accountant, I consulted my lawyer, and I talked to a debt collections agency. It turns out that you have to seek legal and/or debt collections in the state where the client organization is located. Good luck finding lawyers and debt collectors in Iowa and hiring them, sight unseen, when you are in Minnesota!

Legal help doesn’t always help. Another exasperating lesson learned was that since my “claim” was under $20,000 lawyers didn’t want to help me. Wow. That hurts. At this point I decided to write off my loss and “chalk it up to experience.” Fortunately, my company had a great year business-wise, and I was able to absorb the loss – and we still took that family vacation!

Changes to the way I do business. You may ask, “so what are you going to do differently now?” The answer is, “not too much.” I have added a late fee contingency to all project contracts, and I make sure to follow up after any invoice is more than one week late.

The truth of the matter is, I trust people. I always have given colleagues and business partners the benefit of the doubt, and I will continue to do so. I grimace when I think of the time and money lost, but I also express chagrin over the fact that the organization was a provider of leadership development workshops.

As an aside, I will note that 10 months after we started our six-week project, the delinquent organization declared bankruptcy.

Ah, well. It’s just business, right?