Urgent: Invoice dispute - accounting and law.


J

janefield2002

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!
 
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S

Steve

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!
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.



--
 
B

Barnabas Collins

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.
After a year and a half the invoice is still collectable.
(I believe five years is the statute of limitations on this.)

Are you sure the contract fulfilled properly? I'd contact a lawyer
to get involved at this point.

For the sum of millions of dollars you may need to file suit.
But my guess would be the customer is in financial straights and
can't afford to pay it even if they wanted to.

I'd contact a lawyer and maybe talk to your CPA and/or
financial advisor to see if you can avoid being forced into
bankrupcy by this company not paying the invoice.

No matter what it says on your invoice, my understanding of
the law is customer still has the right to dispute
improper/inadequate work done.

Get a lawyer involved. That may pry the company loose from
their position to either pay it or dispute it.

My inclination though is you're trying to get blood from a stone.
 
J

John A. Weeks III

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?
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-
 
S

Slap

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 -
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.
 
D

David Martel

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.
 
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B

Barry Gold

[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.
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?
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.
 
N

NC

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 thing is I dont want to start fighting with their big lawyers on
the details.
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.
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.
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?
Can you explain a little more about what I can say to flesh
out the "accounting argument" and make it seem more meaty?
Your "accounting argument" works against you; don't push it.
Isn't it technically accounting fraud?
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.
How *should* the large company have handled it in their
accounting?
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
 
B

Barnabas Collins

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.
Translation: your customer is on the verge of bankrupcy if not there
already.
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.
Time to get a lawyer involved.
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?
"The next call/corresponce you'll receive is from my lawyer."

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M

Mark A

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.

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.
Whether or not they entered the invoice into their accounting system has
absolutely no bearing on whether you are actually owed the money. Invoices
are routinely entered into Accounts Payable systems before they are approved
for payment. Subsequent to entry into the accounting system, but before they
are paid, a hold may be put on the payment due to a possible duplicate
invoice, goods not received, or services not satisfactorily rendered.

At best, if the invoice was originally approved for payment (not just
entered into the system, but actually approved for payment by the
appropriate people who were aware of your services) then you might be able
to show that there was some disagreement within the company about whether
your service was satisfactory, which you might be able to use to your
advantage in court.

Even if the contract says that "the invoice had to be disputed OR paid
within 15 days," this probably is unenforceable if the court rules that your
service was unsatisfactory or that the amount charged in the invoice was not
within the terms of the contract. A contract that does not provide clear and
specific terms may be deemed unenforceable. Also, the company might argue
that the fact that they did not pay the invoice within 15 days was their way
of disputing the charges in total.

At this point, the only way you can collect is to sue for breach of contract
(non-payment according to the terms of the contract), or settle with the
company out of court for a lesser amount. IMO, you will not win in court
based on any internal accounting issues nor are you likely to win based
solely on the issue of the fact that the invoice was not disputed within 15
days.
 
B

Barnabas Collins

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).
Are you sure you satisfied all the provisions of the contract,
i.e. were you supposed to send copies in triplicate to a certain
address(s)?


Were you supposed to compelte a bidding process?

Were you supposed to be putting down a desposit to
back up the bid?

Were there other requirements to the processs that you
were supposed to complete? An inspection?
Use approved materials?

Is this a job for a state/municipality/etc. where you
need to be an approved vendor, be bonded, liscensed,
insured, etc.?

Yeah maybe you completed the job but failed to prove
you were insured? Met safety requirements?

As I was reading your OP the thought that occcurred to
me was is this like Bechtel Parsons on the big dig in
Boston who got a woman killed becuase they didn't fasten
bolts on ceiling panels, used supstandard
concrete, had workers who were drunk on the job,
etc.


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D

David Chesler

Barnabas said:
As I was reading your OP the thought that occcurred to
me was is this like Bechtel Parsons on the big dig in
Boston who got a woman killed becuase they didn't fasten
bolts on ceiling panels, used supstandard
concrete, had workers who were drunk on the job,
etc.
I'm sure OP would be very happy to pay a few hundred thousand dollar
penalty if he can collect 15 billion dollars. (thousand million for the
rightpondians.)
 
C

Charles Calvert

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).
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.
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.
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]
 
D

David Ames

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!
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
 
B

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 ]

[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.
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?
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.
 
P

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 ]

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?


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.
 
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G

Gene Utterback, EA, RFC, ABA

[ 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 ]

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).
<snipped some more>

Exactly what "accounting laws" are you talking about?

Gene E. Utterback, EA, RFC



--
 

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