Debt · Collection

Using a Lawyer vs a Collection Agency to collect debt

Armando Carrasco Software Architect and Developer

June 17th, 2013

Hello everyone, I wanted to get some input from the group regarding your experience with collect debt. We are a small IT consulting company and a customer owes us around $20,000.

Greatly appreciate your comments.


John Arroyo Delivering ecommerce and cloud applications, CEO of Arroyo Labs

June 17th, 2013

Do you think the client actually has the funds or do they have the money, they just playing games with the payment.  In my opinion, it affects the strategy.

Duane Nickull Chief Marketing Officer, Co-Founder at Cheddar Labs

June 17th, 2013

Make sure your TOS and agreement contains an interest clause too.  I had one stiff me for a $63K bill last year.  I am charging them 2% interest, compound every month.  Before they launch, they will have to deal with me.

Other tips:
- always demand deposits
- source code escrow
- make sure you are legally not prejudicing yourself.   

This is a legal issue and I would urge you to seek legal council on it.


Richard Rosen Founder of FastCall --​> #1 Phone Sales Productivity app in the Salesforce AppExchange

June 17th, 2013

Collecting is really hard. I agree w John A - you need to find out if they have funds. Makes all the difference. Be prepared to get 0, or $.10 on the dollar.

Chhean Saur

June 17th, 2013

Just as an aside option, you should also consult your tax accountant. You might be able to write off the debt against the business and force the customer to pay income taxes on the services to the IRS. Of course, I'd rather try and collect the revenue first.

Michael Flynn Co Founder at Bootstrap Heroes

June 17th, 2013

Assuming the contract was successfully completed... telling someone you're going to submit the debt to a credit agency may help because their credit will be affected. If they are disputing that it was completed, that is another matter. Suing is pretty annoying because it is expensive, you have to serve them, you have to serve the correct legal entity, etc. plus you have to actually collect. There are many pitfalls. If the threat of tarnishing their credit doesn't get them talking, then sometimes a letter from a lawyer is the next step, then after that... you might have to sue. That's my personal experience, not legal advice. I certainly might be wrong.

Brian McConnell

June 17th, 2013

I highly recommend Guido & Guido Associates for a job like this. ;)

Warren Cardinal Web Designer | SEO Consultant | Founder

June 17th, 2013

Sometimes just a call and/or a letter from an attorney does the trick.

Michael Brill Technology startup exec focused on AI-driven products

June 17th, 2013

Depends whether they are disputing your bills or not... or whether you expect them to. Assuming you do hire Guido and Guido (another big thumbs up from me btw) then if their first demand is met with a denial of obligation (or just ignoring them altogether), then you're back to square one. G&G isn't in the business of filing lawsuits.

Can you describe your collections efforts to date and their response?

Robert Clegg

June 17th, 2013

What was the name of the website that told you the inside story of failing companies. Was it F#$@& There should be a "collections" website. You can put the real truth about companies who pull this crap. You can totally out freelancers who screw you, etc. I know Elance and places like it have "reputations" and such, but a site with some underground feel to it would be more legit.