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Customers who Don't Pay
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Date: 9 January, 2006 - 08:50

Prior to starting CaseySoftware, I was almost always employed by someone else working for yet another group on particular projects. These projects were for commercial, government, and internal customers, both public and private. I don't think there's anything odd or particularly special about this part of it, but there is one key thing that was always hidden from me.

When you're an employee of another company, barring significant financial difficulties, you are most likely to get paid regardless if the third party pays. When you create your own company and hire other people, you pay those people regardless of whether or not the client pays.

I realize this for exactly one reason. CaseySoftware has had a trio of customers this year who simply have decided not to pay despite admitting a) having a contracted signed to that effect, b) the changes in requirements and therefore deadline were requested and approved by them, c) the work was complete and judged satisfactory, and d) they found the work useful and actively used it for some period. The biggest question that strikes me here is "why!?"

To that question, I've spoken with a number of other small software and/or professional services companies and have found a common thread. There seems to be a sweet spot in the $3k-7k range where many companies believe they can simply not pay and suffer minimal consequences. The amount is small enough to make it cost prohibitive to involve attorneys, but large enough that it's really annoying.

So what are my options here?

  • Small claims court - I have complete documentation of contracts, feature requests, the accompanying schedule changes, along with communications, etc, so I think I would stand a reasonable case.
  • Seek mediation - This is the default and first step required in all CaseySoftware contracts. Hopefully things could be settled here as opposed to involving more attorneys
  • Blogging - Talking about the situation publicly, linking to their site, and publicly discussing their business ethics has a certain amount of appeal to it. Then again, my site has more traffic than all of theirs combined, so it would probably be end up helping their business and harm either or both of the efforts above.
  • Sell the Code - Hmmm... I find this one the most interesting. CaseySoftware grants a license to the codebases we work on, not explicity ownership unless established in advance, therefore we could probably redistribute and resell as we choose. In addition, since they never paid for the work, do they even have a valid license? [Email to attorney already sent.]



Thoughts?


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hmmm..

Submitted by Anonymous (not verified) on 30 January, 2009 - 19:28.

Same situation with web dev. I place a small image on the site hotlinked to my server now. When they don't pay and change the password on me thinking they can trick me.. I blow it up large and wait for them to call me.

All about the money honey :-)

Submitted by Patrick Allmond (not verified) on 9 January, 2006 - 11:08.

Keith my friend,

I am sorry to hear this has happened. But I do like all four of your ideas. In addition I am thinking that some possible contract modifications on your part might be in order. Something to the effect of that no license is granted to the customer for the work until payment has been completed in full to CaseySoftware. You could even go as far as issuing license for your work - a license being an official email sent after the payment has been made. Hmmm. I am thinking now that expiring software might also be in order. Give them a solution that works for 30 days. Once payment has been made they get a full key. The more I drink of this coffee the more ideas I am getting.

If this is company of a decent number of people you might also try contact anybody else you can get your hands on. I don't waste any time going to the top, and Accounts Payable is a good department to start in also. I am sure this happened with a smaller company so it is probably not an option.

Next time you send them a reminder about the the payment send them a reminder about this posting too.

To you from me in OKC. Have a great week all,
P
http://thecustomerserviceblog.com - alive and well
See you on the cat5

My condolences, a little advice

Submitted by Duane Gran (not verified) on 9 January, 2006 - 12:03.

This is indeed a bothersome liability of being in business for yourself. When I owned my own software company I dealt with this a few times. We primarily built web-based software solutions, so we gradually adopted a policy requesting (if not requiring in some cases) that we also host the site for the application. In this way we had the power to "turn off the lights" for non-payment, which was often sufficient to back up our demands.

Businesses who screw over customers get a lot of press, but we rarely hear about the other side. It is unfortunately all too common. Best wishes as you press them about this.

Govt v Comm

Submitted by Ben Bryant (not verified) on 9 January, 2006 - 18:38.

I don't know if it is true since as a contractor I haven't had many commercial customers but I always felt thankful when I was on a government subcontract that the money was reliable. Do you find too that you don't have to worry about the government paying?

Strategy

Submitted by Larry Bradshaw (not verified) on 10 January, 2006 - 08:53.

Incorporated since 1991, I have run into this problem a number of times.

My best answer to this issue is to provide software and services with a disclaimer and copyright notice indicating the software / service is not the property of the purchaser unless payment in full has been made. Usually in an about box somewhere.

This only changes when payment has been received.

Also, it may be helpful to you to post a deadbeats list on your site, and on a community site, indicating both the invidual and the name of the firm in question. That way, others do not discover the same as you have, and you may be forewarned in dealing with firms or people that others have had difficulties with. I suggest that this may be different than blogging about them - just put their name and corporate name and address on the list and leave it there, with perhaps a dollar amount indicated. Similar to posting of bounced checks, this approach has a legal basis and does not cause harm to the company in question which various blogged statements may at some point be claimed to do.

A warning notice of impending addition to this list should be sufficient to garner payment.

Hope this Helps!

Larry

Do not mess around...

Submitted by CT (not verified) on 16 March, 2006 - 05:46.

I would send them an email stating pay up or I will give the software to every competitor in the same field FOC.

Charge a support only fee that they don’t have to pay if they don’t want support. Get your software installed everywhere you can and make some new contacts in the process.

If they have not paid (within the stated or a reasonable amount of time i.e. 90 days) the contract is broken, the code is yours, get back the value of your time another way.

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