I’ve had the good luck of working entirely with companies who pay promptly for work done. The sole exception was a client last year who requested and received a 30-day extension of payment before the contract was signed. The project was done under a time constraint, so I added my own money to pay the image retouchers. That was fourteen months ago.
Since then, payment has been promised upon production of the initial batch of guns. The company has not actually began production of the product. At the one year point, they agreed to making partial payments monthly but went back on the promise. No offer of collateral or alternate payment arrangements was made.
My options are to wait longer (with uncertain result) or to force the issue in court (probably not worth it for the amount involved). The third option would be to write off this experience as a loss and move on. In that case, I see no reason not to make the specifics public as a caution to possible customers and business partners. Your thoughts?
i would sent them the current itemized, and explain that now they are past a reasonable payment date and they are now delinquent, you will start adding a weekly “handling charge” to their bill, and by year end, if not paid, you will sell their debt to a collection agency and/or file a court date. also with credit agency reporting, that should encourage them. a lot.
When you send the above, send via registered mail. Also, it may be a good idea to get a lawyer involved. I hate suggesting that but if it’s a not unsubstantial amount of money it may be a good option.
Do the above, and offer to take it to arbitration rather than court.
http://www.judge.me/ has gotten good press, lately.
There is no easy answer here Oleg, just more questions. I assume based on the limited information here you have had some contact with them. Have things been put in writing? If so, it may pay to ask them to adhere to their agreed upon schedule. If not, it might pay to try and renegotiate the payment schedule, again, in writing. It also depends on amounts and what is important to you. A free consultation with an attorney who specializes in this might better give you some options. It may be cheap to put a lien on their assets, and you may be able use this as a negotiation tool in your discussions with them.
Really, only you can decided if it’s too much trouble and you should write it off. Everyone has their own limits. Just from personal experience, it is relatively easy to get a garnishment and order of continuing lien as long as you have decent proof of the debt owed. Also, to recoup court and service costs involved. However, obviously our experience is with someone making regular wages. Your mileage may vary.
Good luck, and I’m sorry for your troubles!
I do have everything in writing and have been getting input from an attorney. My post here was more to gauge the wind, ask for creative ideas and to decide if posting the info would be a public service. A company that stiffs suppliers may also be less than forthcoming with warranty service and other obligations.
Well, in that case, from a public knowledge perspective, I think knowing who they are would be helpful as a public service.
Public shaming has been used throughout the ages. It is an effective tool. Quite honestly, I value your services and your reputation. If “Oleg Volk” stands behind something, I believe they are on the up and up. Yes, I look at products you do shoots for and consider them for purchasing over other factors all things being the same. So, from that aspect, I think you have a legitimate concern and an image to protect.
“A company that stiffs suppliers may also be less than forthcoming with warranty service and other obligations.”
Good point.
If you go that route (which seems a good idea if all else fails), talk to a lawyer about potential slander / libel issues.
That’s my thought. If the money isn’t worth a court proceeding, and it sounds like they’re putting something new to market, it might be a good idea to go full disclosure, and write the work off as a loss.
If they don’t honor their agreements to a respected photographer such as you who does a lot of good work at selling units, what will they do to a lowly buyer who just so happens to get a bad unit and needs warranty work?
Even Custom houses like Nighthawk have guns that need warranty service. The bigger the production the bigger the chance of an end-user getting a dud.
In the case of companies like S&W or Glock who are really good at fixing issues and turning the gun around, this is a non-issue.
When it comes to an unknown maker, that might be a big deciding factor…
You broached the subject of listing the deadbeats. My take on it is, first consult an attorney about how you do that properly, but secondly, do it. I, for one, appreciate when I am properly informed of such bad management practices, since it will definitely be a decision-point for me. All is negotiable, though. Sometimes, just mentioning to the deadbeat the potential for a negative review is enough to bring forth a payment.
How many guesses does anyone need? You’ve shown a bunch of work for a company with a revolutionary product that even seems to have lost their domain name.
I have not posted any images of products from this company on their request.
There goes my sure theory. Also, the company I was thinking of appears to have gotten their domain name back and it is currently active.
Unless the amount is going to break you, it probably makes sense to chalk this as experience and move on. Hiring a lawyer for even a simple claim won’t be cheap. If the amount and details let you get into small claims court, that might be a good option.
In my business I often extend unsecured credit. After being burned twice lately I’m going to do that only with people I know, and all others will be putting up a cash deposit. I think that’s an entirely reasonable request when you are doing work that’s only valuable to the customer and no one else. Sadly I have seen a decline in payment patterns correlating with the depression we’re in.
As for publishing the company’s name, while I think that would be moral it could easily get you sued if they have any money left and any future plans. Possibly even if you are entirely within your rights. I would agree with the suggestion to consult a lawyer before doing that.
Depending on how bad things are, there may be no money to collect. However, if it’s small amounts that aren’t worth normal court, Minnesota has Small Claims Court for amounts up to $7500; I think most states have something like that. The result is likely to be a judgment, which then has to be collected; but having a judgment is also good insurance against libel claims if/when you publicize the problem. And it’s possible to put liens against assets and things, if you want to. It’s kind of like taking on a new hobby, though. Might be healthier to just move on.
Lesson learned and walk away. You may receive payment should the company survive (if you remind them with overdue notices). But swapping pain for pain is not going to do any good. It will only make them less likely to pay.
I run a small business as a sideline.
Tough call.
The rebel in me wants to see the company shamed.
The businessman in me recognizes that if the company is shamed, what they do produce may not actually sell because of that reputation loss. At that point you don’t get any money from a bankrupt company and we lose a firearms manufacturer and its jobs.
I would start by asking for contact. They haven’t paid and may have a tough time doing so until the guns are produced and sold. They can’t produce and sell guns with a bad rep. Maybe find out more about the production delays? Is it a complicated part? Regulatory issues? If its something that is a genuine mistake and delay, be kind. If its management bilking investors and screwing other vendors then hang em out to dry.
I’m for shaming, and was going to post my own new comment, but you beat me to the punch, Freiheit.
If the company is so fragile that it can’t pay Oleg, and couldn’t afford the public shaming, then frankly it may be better off not being.
We need solid, reputable American arms manufacturers. A good gun design would suffer if coupled with bad business practices. Best let such pairings die in the crib…
I’m not a fancy lawyer or big insider in the gun industry like some of yall, hell I’m not even what some would consider a “big time gun buyer” but I try to spend my money with good companies with solid warranty and customer service.
To do to you of all people what your describing, makes me believe they will royally screw over any of us little people without even a second thought. I would very much like to know who it is so as I can avoid them!
Perfect case for small claims court. No lawyers for either side, perfect for small money amounts and with the “proof” that you should have a simple case for the judge to rule on.
Don’t let them walk away.
I would very much like to know who these folks are. In Florida you can sue for less than $5K in Small Claims Court and the process is easy, your local Clerk of the Court will help you.
I’ve seen stuff like this happen a lot in some of the fields I used to work in. People overextend themselves, things go wrong, others back out, etc. I can understand they planned poorly and put themselves in this position. That being said, a debt is a debt.
I suggest give them options. Unless they’re some multinational jerking you around, you can’t get blood from a stone. Ask for a percentage as good faith money, then give ’em even more time. You may not get your money in a timely manner, but if you write it off, you won’t get any.
You make it sound as if there’s some trouble in their engineering or financial regions. Is this company thinking of folding? Perhaps you can accept prototypes, tooling, or office goods to make up for your losses?
I wouldn’t name names unless they’re completely unwilling to deal. While I doubt anyone would change their mind about working with you on this, but it’s best to be known as firm but reasonable. You will get your money, but we’re all human.
And absolutely take it as a lesson learned.
I’ve been on both sides of owed money in a business. I’ll spare you the specifics, but whenever a courtroom was involved, the person owed money lost at least half of it.
I’m guessing that your contract did *not* have an interest accrual clause for late payment. If it is likely that you will never get paid and that it does not make sense to hire an attorney to go after them (judgement + collection), then at least get some mileage out of it.
Write it off of your taxes as an noncollectable debt and 1099 them. That means that the IRS will get their taste at some point (a written off bad debt is considered to be income for the deadbeat). And then feel free to state the truth: “So and So did not pay their bill after xx months and I chose to write it off as a bad debt.” No opinion, no embellishment, just facts.
This is by far the best course IMO.
Bad debts for personal or professional services rendered are generally not deductible for the service provider who didn’t get paid. The amount Oleg advanced for payment to a third party is probably deductible, as well as any amounts attributable to materials provided to the debtor. Get a CPA to advise before trying to deduct your unpaid bill here. And I doubt the IRS is going to do much of anything over nominal income to the debtor in an amount likely involved here.
Zach, with all due respect: http://www.irs.gov/publications/p535/index.html
You most certainly can write off business bad debts, even as a service business:
“You can claim a business bad debt deduction only if the amount owed to you was previously included in gross income. This applies to amounts owed to you from all sources of taxable income, including sales, services, rents, and interest. “
Jeff-
I appreciate the polite discussion, but your quote proves my point, although it may not be obvious to someone other than a CPA or tax lawyer. Your quote from the IRS begins: “You can claim a business bad debt deduction only if the amount owed to you was previously included in gross income.” Most individuals and small service businesses are cash basis taxpayers, who include an amount as income only when it is actually received by them. Therefore, assuming Oleg is a cash basis taxpayer as I would expect, he has not previously included the billed amount as gross income, and therefore cannot take a deduction.
And there is a precise method described to address the situation, even for a cash basis situation. It can be done.
It really depend’s on how much money is involved and how strongly you feel about the matter. However, if the company has fallen upon hard times and is overextended then where will the money come from? The bottom line is your dealing with an unethical client that has no intention of paying you and likely never did. Follow the money and find the investors, let them know who you’ve been treated in this matter. After this blacklist the company and when asked why you can explain what has happened.
Shame them. As others have said, if an organization will cheat you, they’ll cheat their customers. I’d like to know who it is so that I will avoid doing any business with them.
Oleg, as an 07/C2 who has had to deal with our (in)justice system one too many times, I’m sure by now you have a pretty good idea of what I think about lawyers, judges, and courts. IMO anything you can do to keep the attorneys out of the mix is a good thing. My attorney would say the same thing. 🙂
Some questions:
– Do you think they can afford to pay if you start applying pressure, or will they declare BK?
– Can you afford to take this loss?
– Is the amount over or under the small-claims limit in this company’s jurisdiction?
– If over the small claims amount, is it high enough to be worth dropping a $5k or more retainer for an attorney?
– Did your contract state that interest will accrue on late payments? The ones I see are typically 1.5% per month or 18% per year.
Personally I like Jeff’s advice about issuing the 1099, letting the IRS deal with them, and just reporting the facts to the gun buying public. If you go that route, you do have the rest of this year to attempt to collect, and the 1099 can be issued next January if you still haven’t been paid.
There is nothing like what Heinlein called “the glaring spotlight of publicity”. This is why a fool will try to rob someone but hide his face from the camera when he’s caught. People often don’t mind being dishonest but hate other people being shown they are dishonest.
I have a nagging suspicion I know who the company is, but it is just a wild-assed guess.
That said, I am a huge fan of public shaming, so long as you are ready and willing to burn that particular bridge into its component atoms. Of course, at this point, it sounds like you are already past that particular Rubicon, so spark it up :).
I actually have not done anything about it yet other than politely request a resolution. This inquiry was to see if some non-obvious option might present itself.
Ah, my apologies. I tend to be… too direct :).
You shouldn’t need an attorney to go to small claims – however jurisdiction might be an issue. If the company is local and the pictures were taken locally then that’s one thing – might be a problem if the pictures were taken out of state. Small claims is cheap and easy though so it’s worth a shot.
Personally two things would enter into the decision for me: 1) as a professional your time is money. You’re out not only your money for retouching but your time which can never be replaced – not to mention the time spent dealing with the collection of the money. 2) You didn’t say if they were using the photos in any marketing materials yet. If they were that would very much change things for me.
I would go the business loss route and have them deal with the IRS via 1099 after first telling the company you are going to do it…in 30 days if not paid in full. That way they have one more opportunity to meet their obligations and you can feel comfortable that you gave them much much more than a fair shake.
Moderately creative idea: report this bad debt to every credit bureau you can think of, and cc: the debtor. That might actually prompt them to do something if they have any funds available, since most companies need some level of credit to operate. And it’s a lot less likely to expose you to any sort of libel suit.
Warn them you’re going to do this and the IRS 1099 before you do it. Might produce miraculous results.
Is your debtor a person or a corporation?
Corporation.
That said, 1099s are generally not issued to corporations. Also, 1099s are issued when amounts are actually paid to the recipient of the 1099. Since Oleg didn’t pay them, the 1099 rules probably don’t apply.
They are issued to corporations all the time.
I think you’ve taken a reasonable course so far. Giving them extensions to pay the full amount, then asking for a little at a time through a payment plan. Since the client failed at both of those, you need to find out if they actually have money. If they do, and are just being obstinate or deceitful, then going the legal route would likely pay off. You would get money of some amount. On the other hand, if they don’t really have any money (and they probably aren’t going to at this point), then you’re just trying to get blood from a rock. Stop pouring your time, energy, and money into this & move on to the next project.
Regardless of the outcome, learn from the pain & consider revising your payment arrangements with your clients. Asking for a certain percentage up front is perfectly reasonable, especially if the client is a new one (no need to change arrangements with existing clients if they’ve been faithful). After all, like Zach said you can’t just re-sell your product to another client & recoup your money.
You have a good reputation & a quality product. While some clients might choose not to do business with you if you ask for partial payment up front (which must cover *all* of your hard expenses, sub-contractors & deposits, by the way), those clients are most likely the ones who will cause you the most grief later. Quality clients will have no problem paying a portion of the fees up front. Clients who can’t pay the amount up front might very well be trying to bite off more than they can chew, and would be better served with a smaller/cheaper/more basic version of what they want.
My two cents. 🙂
Regardless, good luck. I know this hurts.
This project dates back to the days when business was slower. They had an interesting product idea and I took the chance. I would not have taken on such a job today.
This has been the true outlier — I’ve literally have never run into this before. The gun industry tends to be quite responsible as a whole.
Stipulating that the company isn’t refusing contact from you and that the $ amount owed is neither very large (to you) nor trivial (to them), there is a so-far unmentioned option available to consider. If in your judgement the company still seriously plans to begin production, propose to them that they secure their existing debt by offering you a first refusal contract for all future product promotion and sales campaigns for a stipulated period based upon commencement of product production. So long as payment of the past-due monies is specifically acknowledeged in such a contract, I would think your lack of urgency regarding payment would be balanced by the potential for possible future business from such an arrangement, and the un-named company gets a more-than-reasonable chance to salvage their reputation as well.
You still have the option to pursue any of the alternative suggestions above (I particularly like the IRS/1099 and publication of that fact option) as a final resolution.
I’d recommend the mechanic’s lien against the assets of the company. The only way they’ll be able to sell anything, short of bankruptcy, will be to settle with you. Liens are also a matter of public record (depending on the state, in VA this is definitely true), so spreading the word of the public record far and wide is perfectly legal and will get the word out.
I don’t know how much the debt is, but depending on the size, do you think your debtor might be willing to grant you an interest in the company, or in a patent? As others have said, if the company doesn’t have money to pay, getting a judgment may hurt it further, which would be counterproductive. If you accepted stock, royalties on a patent, or somesuch, you wouldn’t be any worse off than you are now if the company fails, but you’d stand to do well if it can get its problems worked out.
Do I owe you money? Have your lawyer send a letter from his office, if that don’t work write it off and start taking a presentage down in the future.
I recommend that you put it all behind you and write it off to a valuable lesson. Think of it as the same as a sunk cost, it’s gone and any time, money or effort invested beyond this point is more waste.
Actually, Oleg can claim it as an expense, if he also claims the income. They still add up to zero, so there is no change to his tax return.
This was supposed to be up in the original discussion regarding issuing a 1099 for the services rendered but not paid for.
I’ve been in business since 1978, much of that time selling on credit. I’ve been stiffed so much it makes me sick to think about it. Still it’s very difficult to know what is in your best interest.
Understand that you will have such losses.
At one time we tightened u our credit policies substantially, and in fact we had a far better-looking Accounts Receivable after that. Problem? Yes– we had far fewer bad debts, AND we made less money overall. Freeing up our credit policies made for more uncollectables, and more profit overall. Go figure.
A small claims judgement may be worth as much as the paper it’s written on, but usually it’s worth less, and the time spent getting it served, spent in court, and trying to get it executed is time usually wasted. Unless the amount is life-changing, AND there is a decent chance of getting water out of that rock, move on. Be nice, and try not to make the same mistake more than a few dozen times.
If they don’t have the money to pay you then they need to close their doors, liquidate their assets and slither away. Delaying your actions makes you an investor in their poorly managed company.
Good luck.
I have dealt with this before. I tried to collect about $2400 from a company for over a year and a half. They made multiple promises of payment, all documented via e-mail, including an order for more services.
As they were in another state and it was an amount that would have cost me more to pay in attorney fees I opted for the public shaming route. I made a public post on my web site, showing ALL the e-mails they had sent, including the ones where they even ordered more advertising. Within three days I had a check for nearly all the money I was owed, less $500. Along with that check was a letter from an attorney that once the post was removed I’d have the remainder of my money.
True to their word after I removed the post another check arrived for the balance of the amount outstanding.
The thing about libel is that the truth is always a suitable defense against cases of libel or slander. Therefore as long as you don’t post anything regarding your opinion of the situation and state only facts, the reader will draw their own conclusions. The facts must be defensible with proof. Which if you had any e-mail correspondence with them, those become self-authenticating.
You probably won’t get any repeat business from them, but then again, you probably won’t want to work with them again in the future anyway.
Good luck!
Definitely contact Judge Judy ;^P
Maybe another option is to sell your debt to a debt-collection agency. You will need a written contract or something to prove your debt. They will immediately pay you the money less a fee, f. e. 30 %. Then they will use their attorneys/a court to get their money back from your former customer.
Your advantages: You get most of your money back, you don’t have to wait any longer for it and you don’t have the risk of litigation. It’s still better than a complete loss.
Disadvantage: You will “loose” a big part of your debt – the high fee for the debt-collection agency.
If you consider yourself a professional, then I would be reluctant to air dirty laundry in public regardless of the amount owed you. The thing about having to work with a relatively small field of firearms manufacturers, is that if you name names, regardless of how deserving this delinquent company is, the other companies might be hesitant to work with you in the future if they think that you might do the same thing to them.
Perhaps that would discourage habitual deadbeats from trying to hire me…
One of the things about business that my father taught me was to never burn your bridges, because at some point in your business career you may need them to beat a hasty retreat.
It’s just a thought. Ask for product or stock options in exchange for cash.
I would threaten them with legal action, and outing, and if they did not pay, I would sue them in small claims court. It’s a simple claim. You have writings to prove your agreement, and they don’t have proof that they paid. You don’t need a lawyer. If you do have one, as the prevailing party, that lawyers fees get awarded. That lawyer then goes after their income/assets to collect, you get your money back.
You should be able to find an attorney too, if that is your wish – one who could perhaps do it for something in-kind? Sounds like a good way to network.
I am a lawyer.
Brian, I do have an IP attorney already. I am keeping him posted but not doing anything formally yet.