The Gebesse Blog

Thoughts from the world of technology and business

Deadbeats

Anyone who has ever run a business which sells things that can’t be taken back, like consulting time, accounting work or advertising, will occasionally get a customer who decides not to pay. I’ve been very lucky in the 25+ years that I’ve been running my business and have had very few bad debts. Two of them were clients who went broke for perfectly legitimate business reasons; neither owed me much money and in both cases I worked with the receivers to try to rescue the businesses, as did some of the other creditors. It was in nobody’s interest for these companies to fail.

I’ve had a couple of near-misses. One company had paid me a significant amount of money within the time allowed for the receiver to demand repayment (there is a law about this to stop people emptying the bank account before officially going broke), but as I had been working with them for longer than any employees except the two owners I was classed as a preferential creditor in the same way that employees are and I was allowed to keep the money. The other was a builder of cheapish computers who said to me just before I walked out for the last time that there were some bills he had to pay and some he didn’t, and mine were in the second category.  I had purchased some computers from him for resale and I simply didn’t pay for them. I had an interesting correspondence duel with the liquidator, in which he would ask me to pay for the computers and I would offer to do an exchange of cheques.  (In an interesting aside, the brother of the client asked me later to do some work for him. He told me that he wasn’t like his brother and insisted on paying me on the same day that I did any work.)

Sometimes deadbeats can be amusing. I did some work once for a motivational speaker. (In his book he claims to have invented a term that has been in use for years and admits that the only job he had ever had was in McDonalds but he quit after less than a week. He was charging several thousand dollars a day to tell large companies how to run their businesses.) The motivational speaker thing should have been enough to put me off, as was his statement at our first meeting that I shouldn’t send him newsletters because he was too busy to read that sort of thing, but for some reason I persisted. I was to do two things for him – install ACT! and get it working with Handheld Contact on his BlackBerry. The first time I went the battery in the BlackBerry was flat but there was no charger. The second time the charger was there but the phone had no SIM card in it. The third time everything was there and I found that at the time Vodafone offered the BlackBerry service as an extra-cost item and he hadn’t paid the bill.

I have a policy of never releasing the registration codes for software until I have been paid. I received a phone call from the ACT! distributors in which, between giggles, I was told that he had complained that he was getting an error message and I wouldn’t fix it. The message was “You have 0 days left in your trial period. You must purchase a licence to continue using this product”. They had told him what was needed to get the “error” fixed – pay me. I got paid at least part of what I was owed.

I have been blatantly robbed at least twice.

I had been working full time for a printing company developing two systems – one to allow people to place online orders for small print jobs and another to prepare quotes for larger jobs. A new manager arrived (and demanded a BMW as a company car!) and told me to stop work on everything. Shortly afterwards I was told that my bills would not be paid because the jobs had not been finished. Simultaneously the accounting firm who had been doing audit and tax work was told that they would not be paid, and the company secretary, who had been the proprietor’s best friend for years, was told that the internal accounting he had been doing was not satisfactory and if he wanted to be released as a guarantor for the company’s business loans he should get a court order. (He later told me that he received a call from a bank asking him to guarantee a loan for a new printing press. When he said that he was no longer an employee, shareholder or director of the company the bank immediately released him from all guarantees and were at the printing works within an hour saying that a new guarantor was required or the loans would be called in that day.)

When I asked a collection agency to recover the debt they were told that all the paperwork was in place to file a request with the courts for recovery of all the money they had spent with me over almost two years, and this would be filed with the court registrar within five minutes of receiving any demand for payment. As another best friend of the proprietor was an extremely crooked lawyer I decided to retreat, but I did have revenge. Another person they had robbed was the editor and owner of the local newspaper. They had purchased a half-page advertisement on the back page (the most expensive real estate in the paper) and had refused to pay because “it didn’t bring in enough business”. Between the editor and me we ran a campaign for about a year, telling people about the crook. I had them blackballed from joining a business promotion organisation (giving the reason), and at least two potential customers were advised every week to stay away from them. An accountant friend estimated that we cost them about a million dollars in business during that year.

A nice story came out of this. There was a business function attended by the Premier of New South Wales, and when the editor got back to the office he found that he only had one picture of the Premier, who was shaking hands at the time with the Lord Mayor. In the middle, with her arms around the shoulders of the two dignitaries, was the sales representative of the printing company, who had a habit of photobombing at every opportunity.. These were the days before Photoshop, and the editor told me that he spent an afternoon with a scalpel and some glue creating an image of the dignitaries without the parasite in the middle.

The other case of theft was from a client I had been servicing for more than ten years, during which time I had installed and upgraded ACT! on at least four occasions. The remarkable thing was that on each occasion there was an almost complete change of staff from the previous time I had been there. One person survived from just one purge to the next, but on the last occasion I was called in there was nobody there that I had ever met before. In this case there was a purge while I was still working on the project, and the excuse for not paying me was that the person authorising the work was no longer employed there. There were arguments too about me charging for three booked training sessions when the trainees didn’t all turn up or left during the session and for charging for installing (and waiting for) Windows service pack updates which were essential to allow Microsoft SQL Server to install. I was told that I could always have found something else to do. (No, I was there to perform specific tasks on the timeline and there was nothing else I could do at the same time. My comment that their general IT contractor should be responsible for service pack updates was ignored.) After a couple of months of fruitless discussions and being lied to I finally agreed to take a reduced amount to finalise the account. Need I say that a few hundred dollars less than the agreed amount was deposited into my bank account?

It now looks like I might have another one. Again it is a company that I have been dealing with off and on for about ten years. I was called back in late last year because they were no longer satisfied with the person supporting ACT!. During the last year I have dealt with three people in the position of Office Administrator and two secretaries to the Managing Director. As for the case above I’m being told that the email records of employees who have left are not available so I need to provide copies of emails asking me to do work (including emails sent to me by current employees). Despite doing this I am still being given the run-around two months after the final invoice was presented. I have been accused of issuing ultimatums by asking to be paid.

Unfortunately, good people get affected by the actions of others, so I am going to have to institute revised rules for how I deal with customers. From now on, new customers will have to sign an agreement that they will pay their bills on time and that they understand that registration codes for software products will not be released until payment is made for both the products and for any time spent on installation or customisation. I have avoided using collection agencies but will be using them in the future at even a hint of reluctance to pay. I apologise to the clients who pay promptly and treat me well, but the same rules have to apply to everyone.

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2 thoughts on “Deadbeats

  • Michael Kingsford Gray says:

    “…new customers will have to sign an agreement that they will pay their bills on time…”

    Oh dear, my friend.
    This may very well cause legal problems “down the track”.
    Inserting clauses into a contract that re-assert or restate already existing contract terms, Federal or State laws, and to state what penalties you will apply *if* they break the contract, is a legal minefield, as you are asserting (in the contract) a remedy for their expected breach of said contract!

    (And thereby makes such a default acceptable to you as a foreseen risk, and thereby a part of the contract which grants the other party implicit rights to not pay on-time, should they be willing to bear the burden of your remedy).

    A legal minefield, in which litigants have blown off their own legs, metaphorically.

    Consult a competent contract lawyer, and see if I am “off the mark” here.

    • Software suppliers don’t seem to have any problem with trial versions that drop dead unless payment is made by a certain date. Also, while I was looking for a place to rent recently one of the agents gave me the rules about late rent payments – termination notice after 15 days. Provided you clearly set out the rules in advance nobody can really complain.

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