Teaching Your Customers To Pay – Part 1

Most of us never intended to be “bill collectors,” and yet a customer who doesn’t pay can quickly make us feel like one.   Even worse is the negative impact that a slow-pay or no-pay customer can have on your company’s bottom line.

While there are no “bullet proof” tactics that work in getting 100% of your customers to pay, there are ways that you can improve those odds.    In the first article in this series, I’d like to talk about some steps that you can take at the beginning to help ensure that you get paid at the end.

One of the key things to do at the beginning is to put language in your invoice or contract that if there are any lawsuits arising out of the invoice, the winning party can recover their attorneys fees and costs.   Why is this “attorneys’ fees clause” important?   In the United States, each side is normally responsible for paying their own attorneys’ fees.   This means that if you go to court to collect $50,000 and you have to pay a lawyer $15,000 to do that lawsuit, your recovery is only $35,000 ($50,000 less $15,000).    On the other hand, if your contract had an attorneys’ fees clause, you could potentially recover your attorneys’ fees of $15,000 in addition to the $50,000.

An invoice with an attorneys’ fees clause encourages prompt payment because your customer knows that if they don’t pay you, they could also be responsible for your attorneys’ fees.  As a result, they know that you are more likely to sue to collect.  And, if you do have to sue to collect, the threat of them having to pay your attorneys’ fees is more likely to encourage settlement.

So, take a look at your customer agreements and think about whether adding an attorneys’ fees clause makes sense.

Does Your Business Need A Social Media Policy?

These days, we are either intrigued by or intimidated by social media.   And why shouldn’t we be?  With social media, we can, through Twitter, Facebook or Linked In or our own blogs communicate with the world.   So, does your business need a social media policy for its employees?     Consider this:

* A typical company with 52 employees pays out approximately $65,000 per year for non-work related social media activity based on workers viewing networking sites for just 20 minutes per day.

*  The National Labor Relations Board has sued employers who terminated their employees after the employees posted disparaging statements about the companies or their customers on Facebook or Twitter.

*    Singer Courtney Love has been sued twice for defamation based on statements she made on Twitter.

*   Social media – like the internet — is forever.

The question is not IF your business needs a social media policy, but, instead, WHAT should it be?   Depending on your business, consider (1) limits on time for personal social media at work; (2) guidelines on defamatory statements about customers or supervisors; (3) guidelines on forbidden topics – such as trade secrets, confidential transactions or pornographic topics; and (4) disciplinary consequences for violating the policies.   Be careful, however, about overly broad restrictions.  If in doubt, get help from an attorney who is familiar with social media issues.

What do you do when your client has just been sued? Do these three things first.

Determine the following:
1. WHEN?
2. WHO?
3. WHAT?

WHEN: Determine when the response (either answer or motion to dismiss) is due. Then, call the lawyer listed on the pleading and ask for a two-week extension. Do not, however, reveal to the other lawyer, who is now your client’s — and, thus, your — ENEMY, anything. Confirm this extension in writing by fax or email AND snail mail. It is proper to thank him or her for the extension and to refer to them (at least here) as gracious.
WHO: Who’s the judge? In many jurisdictions (including my native California), each side has an opportunity to object to a judge within 10 days of appearing in that case. If your client has managed to pull Atila the Lawyer Hater as a judge, you don’t want to lose your opportunity to get rid of him to hopefully get Judge Rhonda Reasonable.
WHAT: This is actually WHAT coverage? Many times your client will have insurance coverage for the claims — i.e., the insurance company will pay for attorneys’ fees and/or damages. Find out from your client who their insurance agent is and BEFORE YOU LEAVE FOR THE DAY, send out a letter with the complaint via fax or email AND snail mail with the complaint and instruct the agent to tender the complaint to any and all carriers for which there may be coverage. Do NOT take your clients’ word for it that there is no coverage. Do NOT spend hours analyzing the policy to determine if there’s a covered claim. If there is coverage, your client will have it from the date of tender. Make that date as early as possible. If there is no coverage, no one’s lost anything.