What if a customer fails to pay?

Stupid question, right? Surely anyone in business for long has experienced it - - but this is my first. I have an online toy/children's furniture store. Most of my business is pre-paid w/credit card via my site shopping cart, but since I get a lot of business (and large orders) from schools, daycares and museums, I also accepts POs. The product is shipped with payment expected in 30 days. Well, it finally happened - a daycare center that's failed to pay, doesn't answer emails and phone's disconnected. One of the references that was given is now having trouble collecting as well. So it seems pretty well established at this point that the buyer does not intend to pay.

I know nobody wants to give legal advice, but I'm just wondering if there are standard steps that one takes. Mine is a very small business - literally a "one man show", so I don't have attorneys or a lot of money to throw around. I heard that one could go to the courthouse and file a "breach of contract". I've tried to find more information on how that relates to a buyer-seller relationship where there is no signed contract, but haven't found anything. Does anyone know if this is correct? I appreciate any info/suggestions.

You could make a deal with a Lawyer on a "no pay no cure" basis.

You can try sending the debt to a collection agency and see if they can recover the money. Of course, you'll have to pay them but it may be worth it.

You might also look into Small Claims Court. Have you treid to find out if they are still in business? Check to see if they are declaring bankruptcy.

If this is a small amount you may want to just write it off. Trying to collect on 100% of receivables is generally impossible over time once you start accepting Net 30 terms. If its a large amount there are some collection agencies that will accept bad receivables on a "we get paid when we collect" basis. The percentage is typically 30% - 50%

I hope this helps,

Terry Weadock
Site manager
Instrument Universe