What to do if client refuses to pay????

Your post unfortunately emphasises the importance of having a written contract/engagement letter in place. But that's not going to help you now.

I'm also in a similar position to you with a client at the moment...

Here are my thoughts:

1) Don't let it fester - the problem will not go away. Don't do any more work for this client until the invoice is paid or  part of the invoice has been paid. (Actually ditch this client permanently...)

2) Get a meeting with the client - face-to-face preferably and find out what's stopping them paying your bill. You may need to be flexible on payment terms, but find out why they think the bill is too high or why they think they are able to use your book keeping services for free... If they wouldn't meet you or return your phone calls, then block out your diary for a day and sit in their reception for the day until they talk with you. Make sure when you are sitting in reception that you speak with everyone else who enters reception to see why they are visiting and explain the reason for your visit... It will only take a few of these conversations before you get the meeting you want...

3) The threat of legal action from them is just that, a threat and unlikely to actually be carried out. It's more indicative of cash flow problems at your client.

If your client doesn't do the reasonable thing & talk to you, then you have a couple of options available to you:

1) Write the debt off and learn from your experience

2) Seek legal advice & talk with a debt collection company. Some companies will not charge you for helping you retrieve your debt. You may have e-mails with conversations about the work (& fee) you were going to provide for them. This may be enough to constitute a contract or statement of intent.

3) see if you can take a back up of sage and save it to your computer. Then delete all the transactions you made on sage - only offer to reinstate once they have paid your bill. This is not a great option as it could damage your reputation in the long term.

Good luck!

Hi RS

You've mentioned there being no contract, though I expect you mean to say there is no written contract.

If your client has asked for or agreed to the work being done, even if in conversation then this could form an oral contract.

That said, and with the client saying the bill is too high I think the dispute is simply the amount being charged.

I am really not sure where £1,200 relates to the £350/month, if at all.  I can't help but feel it is extremely high, as the transactions were already in an electronic format and should have been able to be imported into Sage.

Unless you have an agreement to using a far less efficient method to post the transactions into Sage, or had agreed on an amount beforehand, I'd probably expect the client to be thinking it's half to a full day of work involved depending on the format in Excel.

You should certainly be entitled to payment for the work. If nothing was previously agreed in the amount for the work done, you may have to consider not the time you may have spent in the work but how much it is worth to the client and what is a reasonable value for the work.

David Toohey
The Accountants Circle

Telling you he will send you a letter is hardly a threat unless he is threatening to sue you, but what could he sue you for? He sounds like he does not know what he is talking about. When someone responds to a request with a threat I always think they are on dodgy ground and that they know it.

Hi RS,

I think to some degree running an accounting practice we have all been there. I have been caught out on more than one ocassion, and I guess will still be disappointed in the future.

My lesson learned is that if the work is going to be of a sizeable nature, then it is a good idea to agree a price or a rate and bill on a regular basis, that way the alarm bells should start ringing before the bulk of the work is completed. You could even ask for a deposit to start the work.

You mentioned £350pm and presented the client with a £1200 bill, that sounds like bad communication from your side.

I think your first action should be to avoid legal threats and try and discuss this with the client, and reach a compromise. Bearing in mind the more time you spend trying to analyse and re-analyse the work you have billed, the more productive time you are wasting on billable other work, unless you have plenty of free time.

You may be able to reach a compromise. Is the client unhappy with the job you have done and why, find out! Sounds like he either didn't fully understand what you were going to do for him and maybe feels ripped off.  

If you can reach a compromise, their may be future work for you, and in time you can recover the losses, dont cut off your nose off to spite your face!!

If all fails you could go to the small claims court, and you will have an opportunity to put your case, and accept the judgement, and hopefully move on.

Good luck in settling this.

"Please advise if fee I charges is higher than expectations.

You want to know WHY it is higher ie. what he was expecting for what amount?

"If you feel it is higher then I will consider reducing it abit."

Don't say that. You automatically will have to reduce the amount. Consider his response to the above and then consider whether you should reduce your bill.

If there's uncertainty about the size of the bill it's best to keep the client informed of the charges at each stage even if he doesn't have to pay yet. If you explain what you have done for £300, £600 and £900 and he hasn't complained then, unless there is something wrong with the quality of work, the dispute is only about the last £300.

 At the top of the post you say: 

"we need to streamline previous 10 months work which client has put in excel spreadsheets."

Why? You are so close to the year end you might as well have simply concentrated on open items and treated the remainder as part of the annual accounts preparation work. That way you are communicating value to the client and not simply attempting a book-keeping exercise that is pointless.

The lack of an engagement letter doesn't help but I'd suggest that working on a time and materials basis for the 10 month work is part of why you are in trouble on this. If you'd thought this through more thoroughly then you could have given him a get out of jail card while doing yourself a favour in learning about the business AND kept the deal consistent. As it is, you're at risk of losing the whole thing.

But also - if you agreed £350 pm and 10 months have 'cost' £1,200 then surely you are potentially way ahead of the game? 

I think you've got a dilemma on your hands. You 'agreed' £350 but have demonstrated that 10 months can be done for a fraction of the price. I know it is not that simple but put yourself in the client's shoes. 

At this stage I would take a hit on the £1,200, offering to put it towards year end. 

Oh - and by the way...Sage? Are you asking for trouble taking a client from spreadsheet to Sage?

 dahowlett

Yes, I missed that. If the 10 months in spreadsheets is the first 10 months of a 12 month accounting period I would have prepared that years accounts with spreadsheets and then started the new accounting year on Sage (if that's the accounting package the client wanted).

I can sympathise that converting spreadsheet bookkeeping to Sage can take longer than expected to get it into the right format, checking it, reconciling it, etc... if it's been done particularly badly on Excel. 
But from the client's point of view, they probably thought that their 10mths of spreadsheet bookkeeping was absolutely fabulous... and therefore, a bill of £1200 for effectively re-doing it was probably a shock.

In future, you might wish to prepare a client in advance for receiving a large bill or consider invoicing in instalments and perhaps giving them progress reports as you're going along.

To follow up on DAHowlett's post where 10mths at £350 doesn't equal £1200.  Is there a possibility that on a monthly basis, there would be additional value and services provided (such as timely monthly reports, credit control, payroll etc...) that wouldn't have been done in doing the whole 10mths together retrospectively, that could justify the gap??

(But yes, I agree, that doing 10mths of bookkeeping could have been wrapped up more efficiently finishing the "year end" in spreadsheet form and moving to Sage for the new year)

That said, I hope you manage to get some payment...

Louise
www.figurate.co.uk
www.happyaccountant.com

Why are you charging only £15 per hour - that seems to cheap to me. 

You can still track the customers and suppliers by sorting the spreadsheets on the name.

This means you don't have to enter everything into accounting software.

I am not sure whether your client is honest and above board. Maybe you haven't overcharged him given the mess he gave you and maybe you made it clear to him as you went along how the costs were mounting. I would never not pursue fees for any unpaid work, but suing a client is a real learning curve if you've never done it before, and your case needs to be prepared meticulously. Winding up in front of the judge you will find most of the dishonest clients have not done any preparation prior to the hearing and it's pretty easy to wipe the floor with them.

Over the last 20 years I have had to take 5 former clients for book-keeping to the Small Claims Court because they would not pay my bill. I had Engagement Letters in place for all of them. In each case their affairs were in very poor order when I took them on and I explained to them as I went along that the time was clocking up as it became clear that queries would be numerous. These clients were all, without exception, unpleasant (in one case violent) and utterly dishonest. Their counterclaim in each case was that I was incompetent, although they were at a loss to state in what respect. I won all the cases and got paid with interest, but the many many hours preparing each case convinced me that choice of clients is the key to getting paid in full and on time.

I now will not touch with a bargepole anyone who does not strike me as honest and reasonably responsible on first contact. If I encounter too much moaning about fees from people with complicated businesses who can't be bothered to give me good quality information to begin with I seriously consider giving them notice to go elsewhere.

It is important to speak to clients with authority and clarity, and you should not give them the opportunity to treat you as a subservient person.

By using Engagement Letters, setting boundaries beyond which you will not go and keeping in regular touch with clients whose original data is not good quality you should be able to keep the clients onside.

If you are confident about the quality of your work and that you have held to your side of the agreement then you could reasonably assume the client is trying to 'rip you off'.

If this is the case I would definitely go to the small claims court. Clients that 'rip you off' are likely to brag to their friends and companions about how they got the work done for free, and will also harm your reputation in the process. If you don't do anything except write off the loss you will get more of the same.

Hi RS

Sounds to me as if there was not a valid contract in place from the outset specifically for the one off piece of work for the value of £1200 but just for the £350 pm.  If that's the case then you wouldn't get very far with the small claims court and your debtor I feel would be successful in their defence and counter claim.

This has nothing to do with the value of the work you have done, why you have done it, whether your fee is reasonable, how it has been calculated etc.  It's purely a point of contract law ie; there not being a specific and measurable offer of work (sage inputting £1200), with an acceptance of that offer, and consideration (benefit for the client). I'm not a lawyer, just a qualified credit manager and that would be my take on this if someone asked me to help to recover a debt like this. 

Having engagement letters should not be a backside-covering exercise or something to dig out for a bad debt claim as by that time the damage has been done on both sides. 

In terms of practical advice now my recommendation would be to talk with the client and explain that you did this work based on your understanding from the last meeting and how this fits in to the overall plan of work and communicate clearly what the benefits are to them of the work you have done for them. Otherwise they won't appreciate why you have spent your time doing what you have done if there's nothing in it for them. You might ask them what they think they agreed to at the last meeting as their understanding and yours are obviously different.  Did you have any minutes or emails confirming actions after the meeting?

Obviously it's important to try and learn from this so that things don't happen like this in future. Perhaps you could introduce Order Forms for special /ad hoc pieces of work?

Kind regards

Maxine

The OP and the client did have a contract even if some of the terms were implied. The extent of the work seems to be agreed and the price was agreed at the OPs normal rate per hour. The client could complain that this rate was unreasonable but that would be for the judge to decide. Given the OP and client had agreed to a monthly rate of £350 I don't think the client would get very far with his defence of unreasonableness.