Volume 7, Issue 5, September-October 2003

Legal Minds 
Michael E. Levy, Esq.

Show Me the Money—Please!

It was great hearing from so many of you in response to this new column in Window Film magazine (see page 6 for some of the comments). A few of you shared your own horror stories; others wanted some more ideas on how to avoid them in the future. But, through it all, a common theme emerged: “How do I make sure our company gets paid for the work it does?”

I will now let you in on a little secret that the legal community doesn’t want you to know. I will probably get in trouble with some legal eagles for letting you know you are not alone, but here goes: 

Lawyers don’t get paid either. 

That’s right, lawyers have clients who stiff them just like you do. We do work for people who just don’t pay us; people who hide from our collection attempts; people who pass bad checks; and all the rest. We don’t talk about it much because we don’t want you to know that we are no better at protecting ourselves than you are. Yes, we have some extenuating circumstances. For example, it’s often difficult for a client in jail to pay his debts, but that’s besides the point. The point is, we all want to be paid for our goods and services.

While no system offers full protection, here are some things I suggest to help ensure you get paid in a timely fashion and in full.

Let’s talk about residential accounts now. First, remember that there is no requirement that you extend credit to your customers. Credit is a privilege, not a right. If you are considering extending credit, ask your customers for references and call them. Or, offer your customer a discount for full payment in advance. 

If you do decide to extend credit, I suggest you always require a deposit roughly equal to your costs (labor and materials) for the job. This way, if there is any delay or lack of payment, your out-of-pocket costs will be covered. And, if for whatever reason you never collect, you will be out of your profit—but not your expenses. Don’t begin work until the deposit clears. 
(Yes, I know that asking for a deposit is much harder to do on commercial jobs, but we are talking residential here.)

Secondly, I suggest you have a written estimate, work order or authorization to proceed that is signed by your client. This document should spell out the price, what you plan to do clearly, the terms and conditions under which you expect payment and what you will do if you are not paid. 
At a minimum, I suggest stating: “If payment is not made when due and remains unpaid for ten (10) days thereafter, interest shall accrue at the rate of ___ (___%) percent of the balance due.
In the event of Buyer’s default, Buyer shall pay all costs that may be incurred in collection, including reasonable attorney’s fees.”

Be aware, too, that many states have laws that require the bill for the final work done to be within a certain percentage of the estimate. This is where a written estimate can both help and hurt you. In Virginia, for example, a customer cannot be required to pay more than 10 percent more than the written estimate for many types of work.

Next, you want your client to sign a document acknowledging that the work has been completed in a timely manner and to his satisfaction. Customers can be very slippery about signing such things. Move into his kitchen if you have to, but get that form signed.

One film company owner with whom I spoke told me he always leaves a little “problem” behind—something that is very noticeable but easy to fix. Invariably, he alerts the customer to the problem (“as if they could miss it,” he chuckles) and says he will be back to fix it. He waits a day and then calls to say he’d like to schedule a time to come over to pick up the check and fix the problem. He says he has never failed to leave with a check.

Finally, you’ll want to have an aggressive collections program in place. You’ll need to call and remind your customers to pay. Every day you wait beyond 30, 60, 90 days, increases your chances of never getting paid. 

Let’s say you have done this and nothing has worked. Your customer has an open invoice 93 days old and shows no sign of paying it. What do you do now? We will answer this question and look at some of the protections available to you in the next issue of Window Film

Mike Levy ( mlevy@levylegal.com ) is the president of the Law Offices of Michael E. Levy, in Stafford, Va. He practices in Virginia and holds a law degree from Georgetown University and has been a practicing attorney with a strong knowledge of the film and glass industries for 20 years. 




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