Steps a professional services firm could take without resorting to litigation or hiring a collections agency include:
- Learn why the client refuses to pay. Is it a lack of funds or dissatisfaction with the work?
- Negotiate with the client in an effort to establish a payment schedule.
- Tell the client the firm will report them to a credit bureau.
- Investigate appropriate state(s) laws to ascertain if the firm can place an accountant's lien on the client's paperwork; a few states have amended lien laws to provide accountants with the right to place liens on, or retain, their clients’ paperwork.
- Depending on the amount owed, take the client to small claims court.
Chicago attorney Adam Goodman cautions that if the professional services firm’s client is an individual—not a business entity—federal and state laws may govern any actions taken. For example, the Fair Collection Practices Act regulates third party collectors, such as collection agencies. Many states have adopted similar consumer protection legislation. “In extreme cases the creditor can be held liable for the misconduct of third party [collection agencies],” Goodman says.