Volume 44, Issue 9 - September 2009



Collecting the Big IOU
How to Follow-Up with Customers Behind on Payment
by Paul Bieber

You’ve done everything right—broom clean, punch list, correct paperwork—and still you’re missing one thing … the check from your customer, Sam and Sally Slopay.

Now what?

First, when your terms are 30 days, make your first polite phone call at 35 days—no matter what. Run your business as a business. Make this call later and you will be paid later. Remind Sam of your terms and specifically ask when you can receive your check. Write yourself a tickler note to follow up on the promised date, asking Sally if your check has been mailed. If it hasn’t, a little firmness will creep into your voice, reminding her of the previous promise and asking if the check can go out within three days. Now the schedule is yours, not hers. Follow up with a phone call on the next scheduled mail day, and so on for up to four promises.

After four promises, any further “guarantees” are worthless. You need to shift to a different approach.
The unquestioned key is to start early. Customers that owe you money will avoid you after 90 days. They know you might not sell them any new work, so they switch to different sources. Since your work is done, your payment is on the back burner. One of the best salespeople I’ve ever met, Irwin Hill, used this phrase: “Keep your customers in a buying situation.” If you collect early, you will get more business. If you don’t, you are on the iceberg looking for the Titanic.

"After four promises, any further ‘guarantees’ are worthless.
You need to shift to a different approach."


Nearing the End of the Line
You are now approaching 90 days. You have sat in the Slopays’ office. You have left many messages, sent three letters.

The end of the line is an attorney and a lawsuit, but we are still far from that. Try these tips:

• Use a handwritten note on your statements. Don’t use off-the-shelf stickers that say “please.”

• Ask for a series of post-dated checks, maybe 5-percent of your job value, dated once a week.

• Offer to broker a payment plan with whoever is paying Sam, saying this will avoid placing a lien. (Lien rights are a whole article to themselves and will be covered in the future.)

• Ask Sam to “put you on the payroll,” placing you on his payroll service as a 1099 employee (no taxes taken out), and have a weekly amount paid. This has been one of my most successful approaches.

• Set up a joint pay for another pending job, and roll your old money into the payment. You will wait longer, but if it is with a good contractor, your money is just about guaranteed.

• Do new work on a COD basis, plus “a little” for the old money. This allows you to keep a customer.

• Ask Sally for a credit card number; make an agreement to bill an amount to their card on a weekly or bi-weekly basis. They will complain they have to pay interest, and if you carry them, they don’t have to pay interest. This is where you get firm, explaining how you are paying interest on the money you had to borrow to run your business because they haven’t paid you.

If you haven’t implemented a finance charge (1.5 percent a month is common), start doing it. When Sam wants to negotiate a payment, you can wipe off the charges. Moreover, you have lost nothing. If Sam doesn’t pay, then you add the charges to your suit amount. There are some rules to do with finance charges. Talk to your local accountant or lawyer for the laws in your state. The primary thing to look for is that you have to tell your customers about the fee in advance of the sale.

Last step: work with a collection agency, not a collection attorney. Agencies will refer to an attorney when needed, but agencies charge less than attorneys and will generally work out better plans than placing a suit.

Paul Bieber has 30 years in the glass industry, including nine years with C.R. Laurence Co. Inc., and 21 years as the executive vice president of Floral Glass in Hauppauge, N.Y., from which he retired in 2005. Mr. Bieber’s opinions are solely his own and do not necessarily reflect the views of this magazine.

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