If a customer signs up and never pays, or perhaps pays once, and then never pays, and after a while (as per your internal policy), you lock their account, do you then continue to increment their balance due? Or does the balance due freeze? If a customer changes their name and moves to Botswana, how long do you chase them?

I'm interested in analysis relative to tax consequences also.


Thanks!

Hello:

I am not sure about the taxes part of things, but here is whatr I think I would do.

As soon as the account becomes past due, and attempts have been made to contact the customer, lock it. Send a reminder email that the account has been locked for non payment every few days or so. After 1 month, if there is no word from the customer, then close the account, but don't delete their files. For the billing part, I would base this upon the actions of the customer. If they come back after a month and a half and start b*tchin about how you ripped them off or something, then continue to bill them, so they would be paying for the time after the account was closed, if they want to open it again. You do not want a customer that is a hassel, so there is no point making it easier for them to become your customer again. If they do not have backups of their files, or do not want to have to upload them again, they may just pay you the extra money.

If after a month and a half or whatever, they come to you apologizing for their "absense" or whatever, and offering to pay you, cap their bill at the day you closed it, and reactivate their account upon receipt of payment.

Before you do anything though, you have to make sure your actions are justified in your TOS. You could charge them a reactivation fee of $100 if you want, but it must be clearly stated in the TOS that they agree to before they sign up.

Those are my thoughts. Anyone care to comment, or add?

I usually bill a client 2 weeks before they're due (give them enough time to even mail a payment if they prefer). To cover us, I mail an invoice via snail mail as well as doing the usual e-mail invoice.

If on the billing date I haven't heard a word from them, I e-mail them and give them 3 days to pay by credit card (or let us know that "it's in the mail," so to speak), or they will be suspended.

After 3 days of no word, I suspend them, while notifying them of this via e-mail. I give them one week to rectify the situation or their account will be closed.

Then I do as promised. That way we only give a maximum of 10 days free hosting if they don't intend to pay.

Sometimes a client won't pay and gets suspended. Usually that gets their attention, they pay, and they usually don't slack off again. I don't take e-mail problems as an excuse since I bill so far ahead of time, and (most importantly I think) I snail mail them. They really have no excuse. (We have one guy who travels a lot so doesn't get his snail mail much, and never checks his e-mail. Hey, it's his responsibility to pay his bills!)

I've noticed that people who no longer want to continue their service NEVER contact their host to let them know. They just let us chase them.

I figure if someone finds it such trouble to pay, it's not worth it for us to keep chasing them down.

Interesting point about the TOS, I don't have this up on our site, and probably should. I can't imagine any legal consequences of shutting them down, though. If they don't pay or contact, that's their responsibility. If their files get lost it's their problem--isn't it? On the other hand, I usually do a GZIP of their site before shutting them down, just in case, and keep it for a month or two on a backup drive on my computer.

I can't imagine any legal consequences of shutting them down, though. If they don't pay or contact, that's their responsibility. If their files get lost it's their problem--isn't it?

Generally speaking... Ethically speaking... logically seaking.... YES... When it comes to hot shot lawyers, I would have to say no.
We are in the days of liability... If something is wrong, bend the truth and do your best to make somebody else pay for it... If you end up with a customer running a business... and they had a "valid" reason for the delay in payment... (like there is one...:mad: ) and the have a good lawyer... I think they may be able to sue you for lost profits, and damages to their business...

I am not a lawyer, but that is what I think....


Anyone care to comment, or correct me?

I would also like to ad: "Better safe than sorry"

Oh also, as for not having your TOS on the site... you could just place a little blurb saying they must agree to the TOS, and if they want to see the TOS then they must contact you.... That way, they have agreed to ANYTHING you put into it...

I just answered another thread about billing. I think I am missing the point.

I get the impression that most of you have to make sure your customers pay you each month. Isn't anyone using recurring billing?

When customers sign up with me, they fill in a secure form thats on the server of the cc company I do business with.

From that moment on, their card will be charged automatically each month. I don't have to look after it, they don't have to look after it. They can access their account info on the cc companies server and cancel the monthly rebilling.

As soon as they do, I get an automatic email about it, and I cancel their hosting account at the end of the payed term.

I wouldn't like to do it any other way

Certainly we accept automatic recurring billing. Nearly 80% of our customers are on automatic billing. However, it is our experience that up to ten percent of credit cards are declined for one reason or another each month. And thus begins the 'chase'.

My question is:

After locking an account, do you continue to bill them, incrementing their balance due for services that they are not, in fact, receiving? If so, for how long? Months? Years?

Again, if anyone has an accounting/tax background and can shed some light on the impact of receivables that get older and bigger every month, that'd be helpful.

Thanks everyone for your input.

Hmm, that would make an interesting legal question. They signed up, but didn't cancel their account. So I guess you can keep billing them and eventually they will have to pay. Although you might have to go to court over it.

But..if you suspend their account and they are no longer receiving the service can you still charge them?

Also, if you suspend their account without them having officially canceled, can you be held liable for damages caused because their site is not operating? Even though they didn't pay?

I can't answer your second question, but as for the first:

When a card gets declined we try to contact them. We don't take a site offline that quickly. So we loose $ 10.- in income. Big deal.
However, if a client does not respond within reasonable time to our emails (1-2 weeks) it's end of story. No more site, no more billing.
Each customer provides us with a contact email upon signup. They are responsible for keeping this updated. So if their contact email changes, they must report that to us. Put it in your TOS.

Hi
Just saw this thread.

I experimented with 2 strategies:

1. E-mail the customer when the card fails.
Do this three days.
Suspend account.
Send rebilling notice for new card number.


2. E-mail the customer when the card fails with a rebilling notice for the new card number.
Suspend account on day 1
Keep sending rebilling notice each day.
Terminate after approx 7 days.


Strategy 1 led to page after page of failing credit card numbers and a large number of eventual terminations.
Strategy 2 led to a small list of unpaid accounts with a similar number of eventual terminations to strategy 1.

Basically, if someone is going to pay at all they will pay within a reasonable period of time.
If you do not get a response from someone within 7 days or a complaint that their site is unreachable, its obviously not that important to them.

If they are not going to pay, nothing you do will persuade them.
I think this is some people's ways of closing an acount, because we often find the domain has been moved to another DNS anyway.

Gordon

We generally allow 15 days before dropping the account into a "Delinquent" status, and send a reminder email. The email warns them to pay by the end of the month or else their site will be deactivated.

At the beginning of the next billing period, "Delinquent" accounts are billed for the new month but also sent a Deactivation notice. We deactivate them by deleting their DNS records.

If they haven't paid within another 15 days, we drop their site and files entirely. We don't pursue the debt because its usually only about $10 at this point.

I've cut a few customers slack, but they usually don't pay in the end. I also allow 30 days for foreign accounts to arrange payment, and may allow more than that if they've had a good record in the past.

I suppose from a tax point of view, I'll write-off unpaid accounts as a business expense. Terms of Service, Service Level Policy and Payment Policy are on my site, and the sign-up form has links and check boxes for each. So once they sign-up, they are stating that they agree to my terms.

Originally posted by NetDotHost


Generally speaking... Ethically speaking... logically seaking.... YES... When it comes to hot shot lawyers, I would have to say no.
We are in the days of liability... If something is wrong, bend the truth and do your best to make somebody else pay for it... If you end up with a customer running a business... and they had a "valid" reason for the delay in payment... (like there is one...:mad: ) and the have a good lawyer... I think they may be able to sue you for lost profits, and damages to their business...

I am not a lawyer, but that is what I think....


Anyone care to comment, or correct me?



I don't agree on that one. If you have a mortgage on your business and don't pay the bank they don't really care if you have a valid reason for non payment. They shut your business down requiring all outstanding balances to be paid immiadiately.
If you buy a car and then don't pay, they don't care if you need this car for your business, they'll take it away.
I am getting sick and tired of people thinking they get away with all what they do. There's no excuse for non payment!!!
Try to explain to your upstream provider that they'll have to wait for their money because your clients don't pay or late. They'll cut your line. So i will wait for the client sueing my company when i shut their hosting account down because of non payment. They could be the pope in person, i wouldn't care. Without payment, no rights! The other way around they'll stand on your door step demanding discounts when you just have to reboot the server and their domain will be offline for 5 minutes.

Well from collection perspective this user's account is sitting on your server eating away at the disk space. Granted you are not charged on the bandwidth but you are still paying for the server so you are well within your rights to accrue the bill on the customer. It is customer's responsibility to cancel his/her account. Having that in TOS can't hurt :). From tax perspective it will work something like that. You'll set up an expense category called bad debt and record any uncollected past due balances as part of that bad debt expense for the year thereby reducing your income and taxes.

Generally speaking... Ethically speaking... logically seaking.... YES... When it comes to hot shot lawyers, I would have to say no.
We are in the days of liability... If something is wrong, bend the truth and do your best to make somebody else pay for it... If you end up with a customer running a business... and they had a "valid" reason for the delay in payment... (like there is one... ) and the have a good lawyer... I think they may be able to sue you for lost profits, and damages to their business...

I am not a lawyer, but that is what I think....


Anyone care to comment, or correct me?

The only way they'll be able to do it is if they can prove it was your fault that they did not get charged. Like you lost the database with their credit card info or replace their index page with the page that says this account was suspended because of delinquency.

Most likely you will not suspend customers account because they are 1 day past due you will send out an e mail to the e mail address provided and attempt to resolve the issue. But if you fail to reach the customer because of the bad e mail, phone, address you've done your due diligence and you are well within your rights to suspend that account.

We do billing similar to how jaschwa said.

We do billing on the 1st of the month for that month.

If the credit card is declined it is tried again. We notify the customer to provide new billing information by the 15th or their account will be supsended.

On the 15th, if they haven't provided billing information, we suspend their account (except for email), and notify them that their account has been suspended and will be deleted on the last day of the month if payment is not received.

The thing that inclines people to pay usually is the message on their web site when their account is suspended. "Temporarily unavailable, please have the webmaster contact their web hosting provider". Customers don't want to look bad in front of their customers.

On the last day of the month, their account is deleted, and we send them a bill in the mail for days 1-15 of the month (the period before their account was suspended).

Of course all of this is posted on our web site under "billing policies".