Dealing With Deadbeat Horse Owners

As a horse trainer, dealing with nonpaying clients can be frustrating and costly for your business. Here's help.

Past due bill
Past due bill

By Rachel Kosmal McCart

Even the most well-known trainers have the occasional client who doesn’t pay. It happens at all levels of the horse industry and in all breeds and disciplines. If you are a professional trainer, you can take steps to reduce the possibility your clients won’t pay on time. If you do encounter a client who doesn’t pay, you have options.

Prevention Is Easier Than Collection

You have a limited number of stalls and an even more limited amount of time, so you want to fill your barn with horses that belong to good paying clients. Having a nonpaying client’s horse in your barn is a liability. Not only are you not being paid for your time, but you are also spending money out of your own pocket to feed and care for someone else’s horse. Furthermore, there is an opportunity cost — you could fill that stall with a paying client’s horse! So, how do you spot a deadbeat before you start hearing the excuses?

Run a Credit Check on Prospective Clients

Have each new client fill out an application before coming to your facility. The application should include a consent to a credit check. A credit check might seem like overkill, but if you would run a credit check before renting out your house, why wouldn’t you do the same before renting out a stall in your barn? Running a credit check can be as easy as a few clicks on the internet, and the cost of the credit check is very inexpensive when you balance it against the cost of having a nonpaying client in your barn. Each of the three major credit bureaus, Equifax, Experian and TransUnion, offer credit-reporting services.
What will a credit check tell you? Sometimes, the folks who spend the most money on fancy horses, tack and trailers are so heavily leveraged they do not have cash left over to pay their trainers, and a credit check will reveal if a prospective client appears to have too much debt. If a prospective client has a completely empty credit report with little or no credit activity, that is also a red flag. Credit checks are good predictors of how promptly your client will pay you. If a prospective client is not paying their phone or credit card bills on time, they will not pay you on time, either.

Who Was the Client’s Previous Trainer?

Your training application should ask the client to list their previous trainers and their reasons for leaving those trainers. Even if you don’t know the trainers well enough to contact them and ask about the prospective client, what the prospective client says about why they left can reveal useful patterns. For example, if the client has had 10 trainers in the last five years, you know they will be difficult to please. Taking on a client who has something nasty to say about every one of their previous trainers is like dating someone who is cheating on their spouse — eventually, the client will be complaining to their new trainer about you! Having an unhappy client in your barn is also bad for business, because they can convince other clients to be unhappy, and griping creates a negative and stressful atmosphere that can impact the performance of both horses and clients.

Good Billing Practices

All training and board should be billed and due in advance. For example, in mid-January, you should send out bills for February and require payment by Feb. 1. For new clients coming in, require payment for the first month of board and training no later than the horse’s arrival date. No payment = no training. For clients whose horses will be going to shows with you, require the client to advance all show expenses, and bill the client promptly for any unanticipated expenses you might have to pay for during the show.

You are an equine professional, not a finance professional, so consider hiring a bookkeeper to handle your business’ finances. It can cost as little as $50 per month, and the bookkeeper will likely pay for him- or herself. Your bookkeeper will send your client invoices out on time, even if you are away at a horse show, so payments can be waiting for you when you get home. If you are too busy to send out bills consistently every month, your clients will suffer from sticker shock when they get one big bill, leading to arguments about the bill amount and slow payments. Your bookkeeper can also help make sure your bills are paid promptly, avoiding costly late fees and interest. If you travel a lot, you can have your clients send their payments directly to your bookkeeper, who can process them upon receipt so those funds will be available to you instead of languishing in your mailbox. Depositing checks promptly also decreases the chances of bounced checks. With organized and updated financial records, you can easily track your business’ progress and use the data to make changes in your program. Finally, your bookkeeper will have all the records you need when tax time arrives.

Encourage Credit Card Payments

Credit card companies do charge fees to process credit cards, but those fees should be balanced against the benefits of being paid on time and regularly. Clients like credit card payments because they are quick and easy, and they do not require cash. Requiring a client to give you a credit card number upon opening an account with you gives you the option of running the client’s credit card if they don’t pay at some point in the future. You can even set your clients up on automatic credit card payments.

Setting up a merchant account that allows you to process credit cards is easy, and if you have internet access, you won’t need special equipment. If you use QuickBooks to manage your bookkeeping, you can apply for an account directly through QuickBooks. You can also apply for a merchant account through your regular bank. If you do not want to set up a merchant account, you can accept credit card payments through PayPal.

Charge Late Fees and Interest

For clients who choose not to pay you on time, charge significant interest and late fees. Interest and late fees serve to discourage late payments and also compensate you for not having been paid on time. If a client has a limited amount of money to pay bills in a given month, which bills carry the highest late fees and interest will influence the client’s decision. Most states have usury laws that limit what you can charge, so consult with your attorney about your state’s applicable limits. To avoid misunderstandings, make sure your training contract is very clear about when payments are due and when they are late, as well as the applicable fees for late payments and bounced checks.

When Clients Don’t Pay

If your client has not paid you on time, follow up immediately after the due date with a friendly phone call to let them know the payment has not arrived. This is another instance in which accepting credit cards is handy — you can ask them right there on the phone if they would like to take care of the outstanding balance with a credit card. Out of town? You can ask your bookkeeper to provide you with a list of overdue accounts and whip out your cellphone when you get a break in the action. If you get voicemail, leave one message, and then keep calling until you get the client on the phone. It is much harder to ignore a live person on the phone than a voicemail message. Learn what good telemarketers know — you have the best chance of getting someone on the phone during evenings and mealtimes. If a spouse who disapproves of the client’s horse habit is home to overhear the conversation, that increases the chances the client will give you a credit card just to get you off the phone.

Bouncy, Bouncy, Bouncy

What should you do if a client’s check bounces? Your training contract should state very clearly that you will charge a fee for a bounced check, and you should collect that fee immediately, in addition to requiring the client to replace the funds from the bounced check. Agreeing to wait and then redeposit the check will certainly result in delayed payment to you and might also result in a second bounced check. Bounced checks are indicators your client’s cash flow is not very strong, so consider requiring a client who bounces a check to pay you only with a credit card from then on.
Have a check you are worried will bounce? Take it to a branch of the bank that the check was written on, and ask them to cash the check. For example, if your client gives you a check written on a Wells Fargo account, find a local Wells Fargo branch and present the check at the branch for payment. You can do this even if you do not have an account with the client’s bank, because banks are legally required to honor checks written on their accounts (provided there are funds available in the account). Not only will you find out right away whether the check will clear, but you will also avoid costly fees your own bank would impose if the check bounced.

Drastic Measures

Your training contract should have a clause that allows you to terminate the contract immediately if the client does not pay on time. Your training contract should specify that if the agreement is terminated, the client must pay you in full before removing their horse or other personal property, such as tack and horse trailers. Although your state might have a law that gives you a lien on your client’s horse for unpaid training and board, trying to sell a horse under the statutory lien process is typically time-consuming and difficult. For example, you usually have to retain possession of the horse, and many states require you to obtain a court order before you can sell the horse, which means you must sue the client and win. Furthermore, once you have the court order, you might have to follow a certain process, such as a public auction, to actually sell the horse. All those steps present opportunities for error, and each one takes time and money. Plus, most of the lien statutes don’t provide for the sale of other personal property, such as tack, that might be worth more than the horse. Meanwhile, the horse is probably still in your barn costing you money! In contrast, if your training contract says you can sell the horse, tack, trailers, etc. to satisfy the client’s overdue bills, you can just take care of it without having to rely on a complicated legal process.

If the sale proceeds are less than what the client owes you, you can take the client to small claims court for the balance. Most small claims courts have free advisors who can assist you in filling out and filing the necessary paperwork. In small claims, your attorney can assist you with preparing and serving your documents but cannot speak for you in court. Contrary to popular opinion, collecting on a small claims court judgment is not impossible. For example, if the client has a job, you can petition the court to garnish their wages.

Where to Find Training Contracts and Applications for Prospective Clients

Equine Legal Solutions offers a forms package for professional trainers that includes an application and training contract. ELS also designs customized agreements for individual clients.

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Written by: Rachel Kosmal McCart

Rachel Kosmal McCart is a lifelong horsewoman and the founder of Equine Legal Solutions, PC, an equine law firm based in the Portland, Oregon area. Rachel is a member of the New York, California, Oregon and Washington State bars and is admitted to practice before the U.S. District Court for the District of Oregon and the U.S. District Court for the Central District of California. Rachel currently competes in three-day eventing.

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