The following article originally appeared in the January 2011 edition of The Myers Report newsletter published by the firm.


Get Paid . . . or Perish, Part II

By Jane M. Myers, Esq.

It’s more than just a little annoying when you promptly and professionally provide clients with the goods and services they request – especially if you’ve set everything else aside to respond to their “emergency” call – and then they don’t pay. You have payroll to meet and bills that have to get paid so you call, you write, then you call some more in order to collect your receivables. After a while you begin to feel like a stalker. Depending on the circumstances, it might make sense to reduce a client’s bill in exchange for prompt payment, or to agree to a different (usually longer) payment schedule. Here’s what you should know before making those decisions.

If You MUST Change the Payment Terms.

You’ve made contact with your client to discuss payment of the bill. Finally, after much discussion, you reach an understanding.

Is that heartfelt conversation with your client, capped off with a teary bear hug the most you can do to ensure you’ll be paid??


As time passes, people tend to remember things in a way that best suits them. That’s human nature. Don’t be surprised if your client truly believes that in the course of conversations you agreed not only to significantly reduce their bill, but also to let them pay it­­­­ ­­over an extended period of time, interest-free, of course. If you decide to rely on a bear hug and memory and the client defaults again, your collection success will be severely compromised.

The bottom line is this – if you’ve agreed to change the amount owed or the payment terms, put it in writing and have your client sign it.

Should You Deposit Your Client’s Check if It’s for Less Than the Amount of Your Invoice?

While it may be true that “a bird in the hand is worth two in the bush,” be very careful if you deposit your client’s check and it’s for an amount that’s less than your invoice. Be especially careful if they’ve included words on the check, or even in an accompanying cover letter, to the effect that the check is intended as “payment in full” or an “accord and satisfaction.” The impact is this – if you endorse and deposit that “bird in the hand” and then try to collect the remaining balance, your client may be able to successfully claim that, in fact, you agreed to accept that check in the lesser amount as payment in full.

What Can You Do?

Here’s how to deposit the check and avoid the payment in full result.

The law provides that to preserve your rights you must endorse the check with words that show you are not accepting the lesser amount as payment in full. There are no specific “magic words” that need to be used.  If you endorse the back of the check with the words, “without prejudice” or “under protest” or “not an accord and satisfaction” that will be enough. You should also strike out the phrase, “payment in full” or whatever similar words your client wrote on the check.  That way, your client won’t be able to claim that depositing the check was your agreement to accept their “offer” of the reduced amount as payment in full.

Know When to Contact a Lawyer.

After repeated broken promises to pay, your client may simply ignore you.  At that point, you may want to consider consulting with an attorney.   A letter from a lawyer may be enough to make it clear that you are serious about collecting the money owed to you.  If there’s still no response, you may have to start a lawsuit, which usually is enough to get the parties talking again so that a settlement can be reached.  Your attorney can discuss with you the costs and expected benefits of various levels of legal action.

A word of caution when trying to “work things out” with your client. While you probably won’t feel it’s necessary to start a lawsuit immediately, keep in mind that you can’t put it off forever without losing the right to your day in court.   New York has a six year statute of limitations.  That means if you’ve exhausted all other possibilities to have your client pay voluntarily and you decide there’s no other recourse but to sue, you must start the lawsuit within six years from the date you provided those goods or services, or you will be barred from ever suing to recover that money.

There are some exceptions to the six-year rule. For that reason, it’s especially important to review your contract when payment problems first appear even if you don’t plan on starting legal action right away.  Sometimes people forget that at the beginning of their business relationship, they actually agreed in writing to shorten the time period to bring the lawsuit. This can have a devastating impact on the party who is owed money and finds they are out of court because they waited too long to sue. This can, and does, happen!

Keep in mind that, depending on the client’s circumstances, extending time to pay might allow the client to stay in business and ultimately pay you.  At the same time, if you delay the collection process, you may clear the way for other creditors to get paid ahead of you.  A careful evaluation must be made in all circumstances so you can get paid…and not perish!


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Please note that this article is intended only as a general discussion of issues pertaining to the operation of a business and that it should not be taken as creating an attorney-client relationship or as legal advice with respect to any particular person, business or situation.  Circumstances and the applicable legal principles vary and you should consult with an attorney and/or other professionals regarding the facts of your particular situation.