Making collections a matter of fact…

April 28, 2011
Thumb_small_avatar25_1
Chicago

If you’re anything like me you hate making those calls to collect past due balances. I spend alot of time with each customer building raport and getting to know them, that when the time comes I have an emotional connection. Then, when the collections don’t get made the situation can boil over and the stuff can really hit the fan!

Therefore I have placed a series of layers into the collections process that more streamline the event and make it a “matter of fact”, with no emotional connection.

I have whom ever is the authorized estimator/sales rep give the customer a courtesy call and ask to collect. Infact it is the responsibility of the estimator, within my company, to collect the balance immediately upon completion of the work when ever possible. However this person has made an emotional connection with the customer so I can not solely rely on them. Therefore assistance is given by the office administrative staff.

I have made it the responsibility of the office manager to scan through the list of any invoices owned each week and resend invoices and/or collection letters. The following is the time frame used for such reminders…

- When sending an invoice it is best to send it to ALL methods of communication, including email, fax and US Postal mail. Always mail an invoice even if you send a copy by fax and/or email.  When sending an invoice in the US Postal mail, include a return envelope and a customer satisfaction survey. Make sure the estimator always gets a copy of the invoice.

Ultimately it is the responsibility for the estimator to collect, therefore a copy of each and every correspondence should be given to the estimator so that they are “in the loop”.

If payment is more than 1 day past due a reminder should be given to the estimator, as well as a reminder invoice sent to the customer. That means if payment was due on the 8th, and today is the 9th of the month, a reminder should be sent to the customer by email, fax and/or US Postal mail. This is usually in the form of another invoice or a “friendly collection letter”. This collection letter can be generated through Quickbooks. The estimator should again receive a copy and a note should be indicated in the folder of date the reminder was sent.

If payment is 2 weeks, approximately 14 days, past due then a phone call should be placed to the customer at all phone numbers provided. The tone of the call should be friendly. You are “just giving a reminder”, “asking when we can expect payment”, “making sure there were no problems”.  A note should be indicated in the folder of date and time of the call and nature of the conversation, what they committed to us when they would pay.

At approximately 3 weeks past due, 21 days, a more official collection letter should be sent informing the customer that is has been (at least) one month since work was completed and their payment is past due. This collection letter should state that if payment is not soon received that finance charges will begin to accrue automatically. The estimator should again receive a copy of the letter and a note should be indicated in the folder of date the reminder was sent. At this point the estimator should make a visit to the customer’s location and ask for payment .

On the 15th of each month assess finance charges to all past due customers. Copies of the finance charge invoices should be sent to the customer by email, fax and/or US Postal mail. No note need be indicated in the folder because Quickbooks will remember these charges.

At no later than 6 weeks past due a formal collection letter is sent using quickbooks. This letter states the customer has 10 days to make payment.  

At 8 weeks (56 days) past due, the file is turned over to collections and/or begin the Lien process.

The management may choose to invoke Lien rights at any time based on the responses of the customer or other circumstances. The estimator loses all commission from this job once the Lien process begins.

<!-- InstanceEndEditable -->Certainly if you run an auto body shop or bakery, collections may be a little bit more straight forward… No payment? No product. You get your car or cake when you pay your bill. How ever if you extend credit to any of your customers, that’s when it gets a little more gray area and the above policies become important.

You’ll see that by making it the responsibility of the estimator to collect, and attaching punishment if he or she fails to deliver those responsibilities; it just plain gives incentive to collect. Furthermore with the office staff also making the collection calls and sending the collections letters it removes the emotional connection between estimator and customer and just makes the whole situation a matter of fact.

With this process; Faces, names and account balances are forgotten. It simply becomes about cause and affect based upon dates. If you are this many days past due, then this is what will be done.


Comments (6)

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  • Thumb_nest-logo-medium
    carolinahandymaalmost 9 years ago

    Thanks for the post.

    If you are willing to share it would be interesting to see your results. For example, at 1st notification x% paid in-full, at 2nd notification x% paid in full etc....

  • Thumb_avatar25_1Author
    Grumpyalmost 9 years ago

    You know I have to be honest I have never tracked such results. However from my memory; In almost all cases if the customer intends to pay they do so after the first reminder. If they don't intend to pay they almost always do so after the notice of intent to lien letter. I suppose all the other letters inbetween are just a formality, you know if you're not getting paid.

    I have only had to sue one customers and it was just his "culture" to negotiate the final invoice which I do not do. I won in court however and he also had to pay legal fees and finance charges so it cost him much more than if he had just paid me in the first place... and I did get paid (which suprised me actually).

  • Thumb_fd21e47b
    BamBamm5144almost 9 years ago

    8 weeks until the lien process seems lengthy. I have yet to lien a property but here we can only do it 60 days from the day initial work began.

  • Thumb_avatar25_1Author
    Grumpyalmost 9 years ago

    You have legally in IL 90 days from the time of last working on the job site to file a perfect lien. You will notice in the document, which is a copy and paste from my official companmy policy, that the company at any time will lien the property at will. That may mean day 1 or day 89.

    If you only legally have 60 days then yes, I would adjust this policy to suite your needs. 8 weeks is 60 days +-.

    The fact of the matter was not the specifics of my day one week three, but that you should just make it an if then type of reflex. I have programmed into my schedule on the 15th and 1st to make phone collection phone calls. It's just a matter of fact. Nothing personal, this is business. It's hard, but it must be done!

  • Thumb_ferrari-612-gto-3-lg
    Sweebsalmost 9 years ago

    Illinois law creates a "4 months/2 years" procedure for enforcing a mechanic's lien. Contractors have four months from completing their work to record a mechanic's lien. If that lien isn't recorded, the contractor can't foreclose on your property. They can still sue you for money, but they can't take your property.

    If a mechanic's lien is recorded, the contractor has two years from completing their work to actually file something in court. Regular court rules apply to that case. Unlike the lien, then, the court case against you won't be a secret. You'll get served with a summons and go from there.

    You could wait to see if the cont

  • Thumb_avatar25_1Author
    Grumpyalmost 9 years ago

    Mechanics liens are not secret. Go to the cook county recorder of deeds website and you can see if there have been any liens filed on a property in the past. All you need is the pin. Don't have the pin, go to the cook county assessor web site and get it, all you need is the address.

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