by Craig Ball
An op-ed piece in the New York Times called Begging for Your Pay describes the humiliating ordeal of freelancers forced to hound clients to recover thousands of dollars of compensation. It brings to mind the occasional posts on computer forensics lists where our colleagues vent about unpaid invoices.
Sometimes, the unpaid forensic examiners wonder if they must throw good money after bad or whether they can refuse to appear at deposition or trial. Other times, the posts prompt discussion of recourse—lawyerly letters, withheld work product or lawsuits. More than anything, these list posters seek commiseration reassurance that he or she is not the only knucklehead who let a deadbeat run up a big tab.
Sometimes, we are so anxious to get new business that we don’t protect ourselves against bad business. Bad business is worse than no business because bad business costs you money…
Please use this thread for discussion of Craig's latest column.
Very good read, and some useful advice - one question though, what's a W-9?
According to the W-9 form itself;
Purpose of Form;
A person who is required to file an information return with the IRS must obtain your correct taxpayer identification number (TIN) to report, for example, income paid to you, real estate transactions, mortgage interest you paid, acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA.
Use Form W-9 only if you are a U.S. person (including a resident alien), to provide your correct TIN to the person requesting it (the requester) and, when applicable, to
1. Certify that the TIN you are giving is correct (or you are waiting for a number to be issued),
2. Certify that you are not subject to backup withholding, or
3. Claim exemption from backup withholding if you are a U.S. exempt payee. If applicable, you are also certifying that as a U.S. person, your allocable share of any partnership income from a U.S. trade or business is not subject to the withholding tax on foreign partners’ share of effectively connected income.
I had the good fortune to work for two long time forensic practitioners (both lawyers) and they taught me several things about running a forensic business. First item on the list was, always get a retainer.
The reasoning was pretty simple. It is more difficult, time consuming and aggravating to collect a debt owed. If you ask for a retainer you get paid up front for a portion of the expected cost.
But the retainer does more than just defray costs. Asking for a retainer also allows you to make an evaluation of your client. If your client complains about your retainer, you can bet your a$$ that your client will fight you further down the line over costs.
To the above I add, that discussing your retainer and the method of evaluating costs also helps you and your client find common ground over what is to be done, how it will be done, how long it should take and how much it should cost. A better educated client should be a happier client.
The reasoning was pretty simple. It is more difficult, time consuming and aggravating to collect a debt owed.
… or give up as early as would be consistent with good business practise, and pass the matter over to someone who specializes in collecting this kind of debt.
I don't have first-hand experience of that, but a previous company I worked for started to do just that with a number of financially sound, but abysmally slow-to-pay customers – invoices were always paid, but usually a couple of months late. After the change, I don't think we had any problems that weren't settled after a reminder.
As usual, mileage depends on local road conditions …
Let me add one thing that Craig didn't cover since he doesn't do Criminal Defense work. In a criminal case, always get your money up front, because in the event that your client is found guilty, they aren't likely to have the capacity to pay. I'd suggest that you estimate the cost of the entire exam, and get that up front, and then if you have to testify, estimate that and get that amount up front. Criminal defense lawyers work on exactly this basis - $X for pretrial, $Y for trial and criminal defense lawyers fit into the category of lawyers who aren't going to guarantee their client's debts, and frankly, I can't blame them.
This is of course why I much prefer working for a corporate.
A few things I feel differently about.
The first thing would be that when I take a criminal case, I work for the attorney, or in the case of a large firm, the firm. That attorney is totally responsible for my retainer and any fees I have. Most work is wrapped up before trial, but if testimony is needed, that check is upfront as well as travel and lodging.
Second would be $x for pretrial $y for trial. Depending on the charge most of the time you are paying a flat rate. DUI ..K7k or even more common is a flat fee based on the level of crime A Felony ..K And in the Federal system it's almost always a flat rate.
Lastly, too hard to estimate the cost of an exam. Not sure what you get as far as computers go, but it seems that most of my cases and most of the ones I talk to other people about leave scope as soon as the letter of engagement is signed. One email leads to a new event, that event leads to a piece of software installed, which leads to a thumb drive being connected. (Granted the cost of the exam difference could be civil criminal, so you could be 100% right from your side of things, I'm speaking from my side of things)
Also, work stops if the invoice is a certain number of days past due. This has worked for me for a long time and I haven't lost one client because of it.
Let me add one thing that Craig didn't cover since he doesn't do Criminal Defense work. In a criminal case, always get your money up front, because in the event that your client is found guilty, they aren't likely to have the capacity to pay. I'd suggest that you estimate the cost of the entire exam, and get that up front, and then if you have to testify, estimate that and get that amount up front. Criminal defense lawyers work on exactly this basis - $X for pretrial, $Y for trial and criminal defense lawyers fit into the category of lawyers who aren't going to guarantee their client's debts, and frankly, I can't blame them.
This is of course why I much prefer working for a corporate.
I agree that retainers and an appropriate engagement letter should always be used. I always try to have a good discussion of the case up front so the attorney will have a good idea of what may develop.
I have no problem accepting money from the client, but the attorney always signs the engagement letter and is responsible for payment. As I use up the retainer I will inform the attorney of the projection for future expenses and secure whatever additional funds we agree are likely to be needed in the immediate future.
I do return any unused funds. Some attorneys have told me they would rather pay more, rather than less, up front. This is particularly important in criminal defense cases. If I am dealing with an indigent defender organization I use the same rules of being upfront about the projection of expenses. In Federal indigent situations the court will have to approve funds and this is handled by the attorney after arriving at the expense estimate.
So far, after a number of years in the business, I have never had a bad debt. The main rule I use is to simply stay in touch with the attorney and make sure they understand what is going on.
Wes Attaway
ENCE
