Make sure you get paid on every transaction.


Times are tough.  Now more than ever, you need to make sure that you get paid for every product and service you provide.  Make no mistake about it- your clients and customers are watching THEIR cash flow closer today than in many years past.  So, you need to make sure that your customers’ cash flow difficulties don’t become your accounts receivable problems.


Every business has experienced some difficulty in getting paid at one point or another, and many business plans are formed with the presumption that a certain percentage of the business’ accounts receivable will go uncollected. The problem of collecting accounts receivable is not usually the cause of a business’ failure, as more businesses fail from undercapitalization.  However, collections problems can prevent a business from growing and will always negatively affect the business’ profitability.


So, how do you avoid the risks that an account receivable will become uncollectible? As is usually the case, preventing the problem from occurring is far less costly than curing the problem once a client or customer fails or refuses to pay you for your goods and services.  Try following these basic collections rules.


Get It In Writing.

Have signed contracts and forms.  Any change in terms should also be in writing and signed.


Get Paid In Advance.

You should require substantial deposits and down payments before you begin ordering parts or using materials. And you should require payment-in-full before you begin performing services or relinquish control of your property.


If You Don’t Get Paid In Advance, Get Security.

This rule does not apply to leasing agreements or the simple cash transaction such as the sale of a dozen doughnuts. In larger transactions, particular those involving the sale of moveable personal property and real estate, the seller should demand a security interest in something of value. A mortgage, a recorded land contract, a mechanic’s lien and a lien on personal property are familiar examples of security interests.


If The Customer is Credit Risky, Demand A Guarantee.

If you fear that a customer is a credit risk, ask for the signature of a guarantor who promises to pay the customer’s debt to you in the event the customer does not. Remember, however, that the guarantee is only as good as the guarantor is creditworthy.  An owner of a business is the natural person to guarantee the debt of his or her own company.


If Your Contract Does Not Allow For Collection Costs,

You Cannot Get Them.

The “American Rule” is that litigants pay their own attorneys’ fees. So, if you must retain an attorney to collect a debt, you will pay the attorneys’ fees and most other collections costs. The exceptions to the American Rule are the existence of a written contract allowing the recovery of attorneys’ fees, a statute allowing such recovery; or the assertion of a frivolous, unreasonable or groundless claim or defense. The easy solution to the American Rule is to include a provision in your contracts allowing YOU to recover your attorneys’ fees, collections and court costs. Your customers should not have the same right to recover against you.

The Check Is Never Truly In The Mail.

The lesson here is to begin legal proceedings as soon as possible and not to delay in collecting your money or retrieving your property.


Call Your Lawyer Early.

As a final suggestion, consult your attorneys as soon as you suspect difficulty in collecting a debt. Often a stern letter from an attorney on a law firm’s letterhead can have a dramatic effect on a delinquent customer. You also should consider consulting your attorneys to review your entire billing and collections processes. A good lawyer does his/her best work before problems arise.  I have assisted businesses whose agreements, leases and other forms were outdated or lacking important provisions which would allow the business to pursue additional remedies against a delinquent customer.  That’s when I’m most effective- in preventing problems rather than solving them.


For a more detailed version of this article/blog, go to my law firm’s website:

4 thoughts on “Make sure you get paid on every transaction.

  1. Matt,

    I am a landlord with several properties. I’ve been having a problem with a particular small claims court judge. He always want to put off rendering a decision on a cases. It takes two to three weeks to get a decision on any type of damage hearing. When I do receive the decision in the mail the amount awarded is always about half of what I asked for, with no explanation. I take meticulous records and proof to court and have everything documented. I’m always surprised when he doesn’t make a decision right there. Is the judge required to explain why he disallowed part of my damages. Is this something I should appeal? On what grounds?

    or am I throwing good money after bad?

    • Let me ask a preliminary question- what COUNTY are you in?

      Don’t name the judge. Just tell me if you are in Marion County or another county.


    • In Marion County, Indiana, there are nine small claims courts. You can appeal judgments from these nine courts to the Marion Superior Court on any grounds. Actually, you don’t need a reason to appeal. So, one option is for you to obtain your ejectment in the small claims court and then appeal the adverse monetary judgment to the Marion Superior Court. That will be a longer process, however. That is one option.

      Another option is to avoid the small claims courts completely and file all of your lawsuits in Marion Superior Court. That is a slower and more complicated process, however. My law firm had a client who experienced the same troubles that you are experiencing. That client, out of pure frustration, filed all its lawsuits in Marion Superior Court. It costs more money and often requires a lawyer’s help. That is a second option.

      A third option would be to ask the judge for a few minutes of her time to discuss her court procedures in private. You cannot talk about a specific case in private with a judge, but a good judge would be receptive to a general discussion about her courtroom procedures and the evidence she requires. I would try to make that overture. That might not work, but it is probably worth a try.

      A fourth option might be to change the way in which you present your case. If you do not provide the court with a one-page summary of all your damages, you should start doing so. I would label the summary as an exhibit and formally introduce it into evidence. I would make a “big deal” out of your summary of damages. It should be typed, include a title, and look like a formal document. Make it a serious effort.

      Here’s yet another suggestion… file a motion to correct error or a motion to reconsider after your next inadequate judgment award. Describe why the court erred and provide an itemized damages calculation. There is not a formal means by which the court in small claims cases can consider a motion to correct error or motion to reconsider, but I would still give it a shot. If you try this, make sure you file this document soon after you get your judgment.

      Another option is to simply keep doing what you’re doing. Frankly it is not unusual to wait two or three weeks to get a decision out of any judge in any court in any county in the state. So, I’m not surprised or alarmed that it is taking some time for you to get your judgments.

      As a final thought, it might worth trying to bring an attorney to your next case. Judges tend to treat litigants differently when a lawyer is present. After that one case, you might find that the judge treats you differently.

      I have given you several suggestions. You might experiment with one two or all of these. Unfortunately, there is no single, absolute and perfect solution. It is frustrating when courts ignore the law and the facts. It is even more frustrating, when it seems that a court has its own agenda. Please be patient and diligent. Persistence helps as well. Keep trying, and keep fighting for a just result in your cases. For your own good, assume that it is your fault that the judgments are wrong. Assume that you could communicate your position better. In other words, don’t blame the judge for hearing you wrong. Try speaking clearer and present a better case. You may be perfectly right and you may be doing a good job of presenting your case, but assume you could do better. You might find that a better articulated and presented case will serve you well.

      Good luck.

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