Recovering money from nonpaying clients can be difficult, but by taking certain measures to protect yourself, you can prevent it from becoming an impossible task.
By Kristin Pitzer
Run your own business for long enough, and at some point, you’ll probably have to deal with a customer who consistently makes late payments or flat-out refuses to pay. This is unfortunately true in the horse industry, where the line between business relationships and friendships often becomes blurred. When you have horses to feed, clients to manage at shows, and little extra time, it can be frustrating to try to chase down the dollars you’re owed. Nonpaying clients can be especially tricky in the horse world because horses still need care, including shelter and feed, even if bills aren’t paid, said Jordan Willette, an attorney based in Phoenix and San Francisco. Still, by being proactive, you can protect your business.
Get It in Writing
When you bring a client on board, it’s essential to have them sign a contract that not only states the terms of your training, the care the horse will receive, and the dates of the agreement, but also explicitly defines the client’s payment responsibilities. Having a written record signed by both parties can help enforce the contract’s terms if you ever need to terminate your services.
“I would put in the contract what the client’s responsibilities will be,” Willette said. “For example, requiring training and board be due at the first of the month. Include late fees and charge interest that start to incur after a set number of days after the due date.”
Most training and boarding invoices are due on the first of the month, but you can provide a grace period, such as five days, in your contract, which gives clients extra time to pay their bill unpenalized before you take action. If the invoice still goes unpaid, Willette said, a written notice of nonpayment should be sent to the client after a predetermined time as a reminder that the bill is past due. Should the client continue not to pay, issue an official termination of the agreement and services.
If the client still refuses to pay, things can get a little tricky. Horses must continue to be taken care of, usually out of your own pocket. At that point, it will be up to your state laws to determine what options you have to recover what you’re owed.
“Some states offer the ability to place a statutory lien on their client’s horse for unpaid training and board,” Willette explained. “After receiving the lien and, in some states, a court order, you can sell the horse for the unpaid fees. An easier option, depending on how much money is in dispute, is to take the client to small-claims court for payment. Filing a lawsuit is another option.”
Work on a Case-by-Case Basis
If your nonpaying client is a friend or a longtime customer, it can be awkward to try to strongarm them into paying what they owe. Sometimes people just forget to pay their invoices, especially if there are personal crises happening in their lives. In those cases, having a signed contract in place with defined late fees or other penalties doesn’t mean the trainer is required to enforce them.
“The horse industry is very personalized,” Willette said. “It doesn’t run as a traditional business model necessarily would because it’s such a small community. You have to decide what is best for the longevity of your business because you don’t want to potentially end a relationship with a long-term client who will take their horse elsewhere. You may want to evaluate the pros and cons of enforcing a hard payment deadline on these occasions.”
If a client of many years is suddenly going through an unexpected financial loss and struggling to pay their bills, other arrangements can be made outside of your contract. For instance, they can be allowed to pay the next month or make payment installments on a week-by-week basis. Just be sure to put whatever agreement you come to in writing so you can refer to it if invoices continue to be unpaid.
“You have the ability to come to a new agreement on how the client is going to pay for those services,” Willette said. “[Training] tends to be more of a personal relationship for a business, so you can have conversations with your clients about payments and invoices, and follow them up with a confirmation email or text message [so it’s on the record].”
Don’t Be the Middleman
As difficult as it is to recover money from someone who doesn’t want to pay, it can be best to try to avoid those situations in the first place. One way you can do that is by having the client put a credit card on file that will be charged after so many days of nonpayment. A caveat to this tactic is that you must have express permission to run the card in your contract along with the terms under which the credit card will be charged.
Requiring clients to pay directly for things like show expenses, supplements, and other incidentals is another way to stay out of the middle of a money dispute. If you decide to keep a cash retainer on file versus a credit card, make sure you’re aware of any legal obligations required by your state, as you will technically be keeping that money in trust for the client.
No matter how much you try to prevent it, there’s a strong likelihood that one day you’ll have to deal with a client who won’t pay. Should you find yourself in that difficult position, it’s never a bad idea to ask for help from a professional.
“If you have a situation where the client isn’t paying and you’re worried about recovering the funds, you can contact an attorney and see what your options are,” Willette said. “You have many options available regarding how to recover money in a worst-case scenario.”
This article is provided for informational purposes only and does not constitute individualized legal advice. Contract drafting and business disputes can be very complex. When questions arise based on specific situations, please seek a knowledgeable attorney for advice.
