Urgent: Invoice dispute - accounting and law.

Hi All,

I am a startup owner and I presented a large customer with a large invoice that he was due to pay about a year ago. The contract stipulates that the invoice needed to be paid (or disputed) within 15 days (after which it is deemed accepted).

After I sent the invoice of about $1.5 Million (yes, it was huge - about 100 times bigger than any invoice we ever sent) we did not receive payment nor did we receive a dispute letter. We waited a bit longer to give the company time - 30 days, 45 days passed. We called the person who signed the contract and I was informed that he had left the company.

We called the accounting department and confirmed that they received the invoice. After several frantic calls, people started not picking up their phones. We continued to send invoices by registered mail with reminders and late fees (as per the contract). There was silence for over a year.

Then we sent an email to the CEO saying that if the invoices were deliberately ignored it was a violation of accounting laws (the company is listed on the stock exchange). Only then did the company reply - they said that they felt they were not obligated to pay the invoices because our services were not "satisfactory". It is total BS and fancy the reasoning a year and a half since the invoice was sent!

The thing is I dont want to start fighting with their big lawyers on the details. I want to keep my argument simple. Regardless of the service (whether satisfactory or unsatisfactory), the invoice had to be disputed OR paid within 15 days. That means it HAD to enter the accounting records in SOME shape or form within 15 days and not doing so is not just a breach of contract, but also a violation of accounting laws since it MUST enter accounts payable.

Can you explain a little more about what I can say to flesh out the "accounting argument" and make it seem more meaty? Isn't it technically accounting fraud? How

*should* the large company have handled it in their accounting?

Please advise!

Thanks in advance!

Reply to
janefield2002
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There are no "accounting laws" that an invoice has to enter accounts payable even if the company is on a stock exchange. At this point your best bet is to contact a lawyer but after a year and half the invoice is probably uncollectible. You should think about progress payments on your next big invoice.

Reply to
Steve

You don't want to say one darned thing. At this point, your attorney should be talking with them, most likely with their attorneys. You don't want to say or do anything wrong to put your right to collect at risk. After all, you have let this thing slide for over a year.

-john-

Reply to
John A. Weeks III

You need a high power lawyer... big time! t will probably cost you a million or so but nothing wrong with collecting a couple of hundred grand for yourself. Right?

You aren't ever going to see your invoice value. Invoices if not paid by the 60 day mark are getting bad, 90 days almost uncollectable. That's just the way it is.

With that said if I was doing a 1.5 mil job I'd want 1 mil up front. But that's just me.

Reply to
Slap

Jane,

You are the owner of a small company. You had a contract with a big company. You did the work and billed for payment. They have failed to pay for 1 1/2 yrs.. You ask for advice. Get a lawyer, have him read your contract and then ask for advice. You claim they owe you more than a million and you are doing nothing. You entertain fictions about accounting law rather than focusing on getting paid. Get expert advice ASAP.

Good luck, Dave M.

Reply to
David Martel

wrote: [OP runs a startup business and is in a dispute with a large customer over an invoice for $1.5Million. Customer ignored the invoice until OP emailed customer's CEO accusing them of violating accounting laws. Customer _then_ notified OP that services were "not satisfactory". Original contract specified that invoices were to be paid or disputed within 15 days.

If you want to keep it simple, stick to the issue that matters: they owe you money and they haven't paid you.

Forget about the "accounting argument". It's not accounting fraud. If they think (or claim to think) the amount isn't owed, then they don't need to show it on their accounting. NOW, once you file suit against them, they *might* then have to show it on their accounting, at least as a footnote. But for a big enought company, a suit for a "mere" $1.5M might not even matter enough to merit that.

Look, you are owed $1.5 million. That's a lot of money. Hire a lawyer to go after them. They'll probably pay more attention to your invoice once they receive a letter from your lawyer's office. Until then, they figure that you are going unarmed in this battle of wits, so they can ignore you. Once you have legal representation, they know you mean it.

Your lawyer can tell you whether your contract language is strong enough to prevent them from raising the issue of the quality of your work if/when you go to court over this, and what you will need to show that you *did* produce according to the contract.

And _that_ is what matters. If you delivered goods and/or services in accordance with the contract, then you are owed the money. "Satisfaction" doesn't enter into it, except for whether they decide to do business with you again in the future. The only exception is if the contract specifies that the goods/services must be performed to their satisfaction ("satisfaction guaranteed or your money back").

$1.5Million is _more_ than enough to justify going to court over, even if you will have to fight with their expensive lawyers. You can buy a lot of lawyering for $1.5M. You might even get one who will work on "contingency", meaning your lawyer doesn't get paid unless you win, then he takes 1/3 or 40% or whatever the contract says. But if you have a solid case it would probably be cheaper to pay one by the hour.

That's another question you can ask: how much your lawyer charges and how many hours he thinks this case will take -- and what he thinks your chance of winning is. Using that, you can decide whether to pay an hourly fee or a contingency fee (assuming you are offered that option).

But do _not_ try to represent yourself in a case involving $1.5M. Remember the adage about the lawyer who represents himself, and consider that you don't know the rules as well as a lawyer.

Reply to
Barry Gold

Unfortunately, it sounds like you'll have to. In court or out of court. Talk to your lawyer, see what your options are. While you are at it, bring up mediation.

OK, let's suppose that they agree with you and admit that your invoice was never recorded. In this case, they still owe you nothing. What they do owe is a fine for lax accounting; and it's due not to you, but to the FSA (I am assuming you are in the UK). The monetary value of the fine is much lower than that of your invoice, so guess which they would choose to pay?

Your "accounting argument" works against you; don't push it.

No; they could claim a technical error, especially since the person who supervised the contract on their end has left the company. They could also claim that the person in question was not duly aithorized to sign the contract.

This is not an important question. The important question is, why did you let the customer get into you for so much money?

Cheers, NC

Reply to
NC

On Thu, 24 Aug 2006 18:56:07 -0400, snipped-for-privacy@yahoo.com wrote in :

How is it that you let this go for so long? When my clients don't pay on time, I get on the phone to them right away and track down the problem. This is for invoices for a few thousand, never mind $1.5M.

The bit with registered mail was good, but you should have let that go for 30 or 45 days at most before exploring other options, such as meeting in person with the signatory or going right to the CEO's office.

I really think that it was foolish to wait for so long before attempting to resolve the problem. If a client doesn't pay on time, get on top of it immediately. The longer you wait the harder it will be.

[snip rest]
Reply to
Charles Calvert

It has been suggested that your customer is on the verge of bankruptcy. As they are listed on the s tock exchanger, why not get a copy of their annual report and financial statements. If they didn't account for a valid contract on their books, their president may be in trouble for having signed off on false financial reporting.

David Ames

Reply to
David Ames
[ NOTE from misc.business.consulting moderator: This was cross-posted to several newsgroups nearly a month ago, but due to some data corruption caused by a hardware crash, was overlooked by the moderation software and the moderators of that group. My apologies to the poster for the late approval and to the moderator of misc.legal.moderated. - Jim Logajan ]

wrote: [OP runs a startup business and is in a dispute with a large customer over an invoice for $1.5Million. Customer ignored the invoice until OP emailed customer's CEO accusing them of violating accounting laws. Customer _then_ notified OP that services were "not satisfactory". Original contract specified that invoices were to be paid or disputed within 15 days.

If you want to keep it simple, stick to the issue that matters: they owe you money and they haven't paid you.

Forget about the "accounting argument". It's not accounting fraud. If they think (or claim to think) the amount isn't owed, then they don't need to show it on their accounting. NOW, once you file suit against them, they *might* then have to show it on their accounting, at least as a footnote. But for a big enought company, a suit for a "mere" $1.5M might not even matter enough to merit that.

Look, you are owed $1.5 million. That's a lot of money. Hire a lawyer to go after them. They'll probably pay more attention to your invoice once they receive a letter from your lawyer's office. Until then, they figure that you are going unarmed in this battle of wits, so they can ignore you. Once you have legal representation, they know you mean it.

Your lawyer can tell you whether your contract language is strong enough to prevent them from raising the issue of the quality of your work if/when you go to court over this, and what you will need to show that you *did* produce according to the contract.

And _that_ is what matters. If you delivered goods and/or services in accordance with the contract, then you are owed the money. "Satisfaction" doesn't enter into it, except for whether they decide to do business with you again in the future. The only exception is if the contract specifies that the goods/services must be performed to their satisfaction ("satisfaction guaranteed or your money back").

$1.5Million is _more_ than enough to justify going to court over, even if you will have to fight with their expensive lawyers. You can buy a lot of lawyering for $1.5M. You might even get one who will work on "contingency", meaning your lawyer doesn't get paid unless you win, then he takes 1/3 or 40% or whatever the contract says. But if you have a solid case it would probably be cheaper to pay one by the hour.

That's another question you can ask: how much your lawyer charges and how many hours he thinks this case will take -- and what he thinks your chance of winning is. Using that, you can decide whether to pay an hourly fee or a contingency fee (assuming you are offered that option).

But do _not_ try to represent yourself in a case involving $1.5M. Remember the adage about the lawyer who represents himself, and consider that you don't know the rules as well as a lawyer.

Reply to
Barry Gold
[ NOTE from misc.business.consulting moderator: This was cross-posted to several newsgroups nearly a month ago, but due to some data corruption caused by a hardware crash, was overlooked by the moderation software and the moderators of that group. My apologies to the poster for the late approval and to the moderator of misc.legal.moderated. - Jim Logajan ]

wrote

Well, clearly they don't have to book an invoice they don't believe is legitimate. Even if they were sued, they wouldn't have to book it as a payable, although it may give rise to a line or two in the footnotes.

As far as accounting laws, it's not like there are accounting cops you could call and file a complaint with.

As many others mentioned, talk to an attorney about collecting that bill.

Regardless of if you ever collect it, take that lesson into the future and collect up-front and bill as the work is completed under some form of progress billing.

Reply to
Paul Thomas, CPA
[ NOTE from misc.business.consulting moderator: This was cross-posted to several newsgroups nearly a month ago, but due to some data corruption caused by a hardware crash, was overlooked by the moderation software and the moderators of that group. My apologies to the poster for the late approval and to the moderator of misc.legal.moderated. - Jim Logajan ]

Exactly what "accounting laws" are you talking about?

Gene E. Utterback, EA, RFC

Reply to
Gene Utterback, EA, RFC, ABA

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