Debt collection management for writers

This is my experience only, but...

Debt collection agencies are the last resort. Their manner and method pretty much ensures that there will be no working relationship from that point on. And that's generally why creditors go to them. They don't care if they ever hear from you again - they just want their money.

One question - have you contacted a lawyer first? One of the most effective debt collection tools I've found is a letter to the publisher on a lawyer's letterhead.

In the end, the biggest question is whether the amount of money you are owed is worth taking that next step. Between the expenses and the effort, it often turns out that any money you might get just about pays for what you had to do to get it.

That's your call, though.

Is it a small enough company that your editor is ALSO the person who writes the checks? If not, have you contacted anyone at the company besides your editor? That might be a start point.

But if they're one in the same, then he probably doesn't have the money to pay you, so he's stalling. Then I agree that an attorney letter is called for. You might contact local colleges in your area that have law schools. They usually have a "Student Bar" office that does pro bono (free) work for the public, as training exercise. The work is overseen by law professors--lawyers themselves, and is usually enough to shake loose the money from the publisher. But pconsidine is right. You'll lose that market forevermore. If that's okay, then go for it.

It depends on the size of the claim. I can't see most collection agencies being interested in little tiny disputes, say under $1000. And lawyers cost $100+ an hour.

If a little publisher fails to pay, I usually just have to write it off as a loss -- they're risky operations from day one. Some writers groups like the SFWA or the WGA (if you're a member) have legal and complaints divisions, but they can't fly across the country and shake someone until their pocket change drops out. Assuming there's even pocket change to be had.

When my website clients fail to pay, usually a few friendly reminders or regular invoices get things rolling again. If they can't pay the full amount, settle for half now, half in a month or so. But if the entire relationship is based on emails, it's easy for someone to just trash your messages and pretend you don't exist.

Of course, I'm also owed $13K that's tangled up in a bankruptcy case that will likely never end. 5 years now. I'm sure the lawyers are all getting paid and there will be nothing left for the folks who got screwed.

Stay on top of your billing and do the best you can.

I've used my experience in other areas of business when I've had to pressure clients to collect my writing fees. It helps to have a clear escalation path.

1) On your invoice, indicate that there will be finance charges and late fees if it is past due and have a clearly stated due date. Check with the editor to find out who the invoice should be sent to.

2) As soon as the due date passes, send out another invoice showing that it's past due, and add the late charges and finance charges. Marking this "PAST DUE" in big red letters helps get their attention. Indicate that if payment isn't made in 30 days, more late fees and finance charges will be added. Call or contact the editor to find out if there is a problem with payment.

3) If another 30 days goes by, send another invoice with the additional fees. Send it by certified mail and require a signature - ask for a return receipt and the PO will send you back a post card showing who received your letter. Call again and talk to the editor and to whoever does accounts payable to find out if there's a problem. Let them know you sent another invoice and ask them to look out for it because it's past due.

4) Wait a week or two and follow up with another call. Be polite. Say that you know they received your invoice and ask when you should expect a check. If there is a problem, ask them if it would help to set up a payment schedule. If you ask specifically, "Can you afford to pay $20 now?" they will usually be embarassed enough to pay more than that. Get them to agree to a payment schedule, and send reminders.

5) If you can't reach anybody or can't get a satisfactory answer, write a formal letter to the highest level person you can find at the company explaining the problem. Attach copies of all your invoices and correspondence. Send this by certified mail and be sure to get a return receipt. Send copies of this to the editor and the accounts payable department. In your letter, let them know that if you don't receive payment by a certain date, you will have your lawyer contact them. You don't have a lawyer, but they don't need to know that at this point. Frequently, just the threat of legal action is enough to get a debtor moving.

6) If you get no response, let Jenna know. I've seen her offer to contact publishers. She has the leverage of mentioning the problem in her newsletter with a circulation of 75,000 (I think). Most publishers don't want word to get out that they don't pay, because it means no one will write for them.

7) If none of this works, now's the time to decide whether to approach a lawyer. Some lawyers will write a siimple collection letter for a very small fee. Ask ahead of time what it's likely to cost.

As you go through the process, be sure to keep a file of all your correspondence and a log of your phone calls. When they do agree to pay, they may ask you to waive the finance charges and late fees. You can do this if you want to, but keep in mind that there have been real collection costs (certified letter postage, long distance telephone calls, paper and envelopes, your time). You may want to waive some of the fees and point out to them that their failure to pay cost you money in terms of time, materials, postage and phone charges, and that they should be paying for this additional cost.

It really is worth it to continue to send invoices and to call, at least once a month. Try not to get personally involved--it works much better if you stay calm. Debt collection is part of doing business. As long as they are still answering the phones and haven't gone out of business, it's worth continuing to try to collect. Sort of like water torture - drip, drip, drip.

I think that initiating a smear campaign is a bad idea.

1) it shows you're angry and looking for revenge, not money.
2) It lays you open to law suits that you probabaly don't want to have to defend yourself against.
3) Making them angry doesn't mean they'll pay you.
4) It's unprofessional.

I think it's very important in cases like these to take the moral high ground. Don't lower yourself to their level by behaving in an unbusinesslike manner.

ATP said:

I made no mention of a 'smear' campaign, nor wish to imply this. 'Campaign' was too strong a word. Rather, my meaning was that if one chose to, one would be within one's legal right to raise the matter with said proprietor's advertisers, and let these advertisers know the problems that you are having with the publisher.

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I don't see what purpose it would serve to go to the advertisers. The only leverage an advertiser has is to refuse to advertise, which would reduce the income to the publication and make it less likely that you would be paid. Almost certainly, the publication would see it as an attempt to discredit it with its customer base which would not make them more willing to cooperate with you. I fail to see how either of these results would be of benefit to you in collecting.

Would you conclude that many - though not all - debtors are such because of their general attitude of 'unwilling to pay, irrespective'?

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I have no idea why businesses don't pay their bills and no data on which to base any generalization. Based on my own experience collecting from a variety of businesses, I have seen cash flow problems, dishonesty, and incompetence.

I think there's a minor point that we need to be mindful of - there's a great difference between debtors who won't pay and those that can't. Often, the people we deal with would love to pay. It makes life as an editor fantastically more difficult to be known as a person who doesn't take care of his writers. However, there's often little that they can do that you couldn't do yourself, i.e. nagging the hell out of Accounts Payable.

Just keep your anger directed in the right place. From an editor.

K1P1 and pconsidine offer excellent advice for collections, not just for writers, but for any business.

In recalling earlier threads, payment collection has been an ongoing issue for ATP. He's in an unfortunate position which many people face from time to time. The only thing I can add is to not take collections to such a level in which your costs exceed what's owed.

As an example, several years ago, I spent $5800 in legal fees to collect $1100 in a non-writing related suit. I was so angry at the client for deliberately trying to rip me off, that I swore I'd sue for payment no matter what the cost. Well I did, and the final judgment was decided in my favor. I was elated to collect the funds owed to me. My attorney was overjoyed as well, obviously at my expense. In hindsight, how do you think I feel about it now?

I'll fight hard for what's owed to me, but I've learned not to give up the farm for one stray cow.

I think it's very important to view the business side of writing like any other business. A certain number of accounts will simply never pay. It's not personal. It's just the way it is. It never pays to get angry or to spend too much time on it. That's why it's good to have a plan in place beforehand, so that when it happens you just go to step one, send out the invoice or letter, make a note of it in the file, and put a note on your calendar to follow up later. The whole point is to spend as little time, effort and money on collections as possible. Never, never take it personally.

ATP said:

Thank you, but I wish to point out, that from an examination of my records, I have had only 2 debtors. The most recent prompted this thread. 'Ongoing issue' makes it seem as though I always encounter this problem with each and every client. This is most certainly not the case.

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From my own recollection, which is spotty at best, you've claimed in the past that collections affect your work, that the energy involved in recovering funds owed to you is counter productive to the work at hand. I could be making this up, but I doubt it.

As for tax write offs, there's no way to truly compensate for bad business decisions. It's like saying, "Well, that cut on my hand sure got infected. Since I let it go untreated, I lost my arm. But it doesn't really matter. At least the blood poisoning never reached my heart."

ATP said:

I can only conclude that you are implicitly suggesting that I drop the matter, for the reasons indicated above. Correct? I certainly hope that you are not heading down the path toward implying that I am the party at fault.

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I'm not suggesting you "drop the matter," or anything of the sort. I'd encourage you to seek all avenues to remedy payment issues. If there comes a point, however, in which you exceed the cost of what's owed to you in your battle to collect remittance, then it might be a good idea to rethink your position.

In addition, how can you possibly perceive that I was suggesting you are "the party at fault?" I would never offer an opinion at your expense. Like the posters before me, I'm trying to help you.

ATP,
The more I think about this subject the more I think the discussion could benefit all writers. I'm going to port this into the AW Roundtable forum.

Great question and good discussion. Thanks.

Silver King said:

As for tax write offs, there's no way to truly compensate for bad business decisions. It's like saying, "Well, that cut on my hand sure got infected. Since I let it go untreated, I lost my arm. But it doesn't really matter. At least the blood poisoning never reached my heart."

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If you are filing taxes using a schedule C (small business) in the US, you can indeed write off bad debts -- not that that is much compensation for not getting paid, but it can reduce your taxes on the amounts you actually collected.