How Can I Make Sure I Get Paid?

I currently have a small business that is bringing in a decent amount of work doing street light location design in Phoenix. I had been working with a smaller company that was bought by a larger company earlier this year and since that time I have not received any payment from them. First, the larger company was giving me problems because I was a sole proprietor and they didn't want to write a check to an individual. I have since formed an LLC and have filled out all their forms but still have not been paid. I try to contact their accounts payable department everyday, but I receive no response. Do I need to take legal action? What factors should I consider?

Any time you're dealing with delinquent payables, you have several factors to consider.

First, do you have a written agreement that specifies when you get paid, and if you can charge any penalties, such as interest and attorneys' fees, for delay?

Second, consider how much money is at stake. If the outstanding receivable is $1,000, but litigation costs will amount to $2,000, you'll be spending more money to collect what's due to you.

Third, what is the likelihood that, even if successful, the new company will have the money to pay you? If they are teetering on the brink of bankruptcy, you could win the lawsuit and still not be able to collect. A particular factor for your situation is whether or not the new company purchased both the assets and liabilities of the old company, or only the assets. If they did not agree to take over the liabilities then your only recourse would be against the old company.

Sometimes, delinquent customers respond more quickly when they see that there is a third party in the mix -- such as a collection agent or attorney to make the phone calls and send the letters for you. You may want to speak to a collection attorney to find out what the process involves in your state and given the size of your claim. It may be cost effective to hire him or her to write a letter to see if that will get some payment movement in your direction.

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