We all know that this economy is not completely recovered from the past several years of economic problems, but things are beginning to look up in some parts of the country. However, collecting payment from some customers may remain a problem. I recently spoke with a contractor who completed a project several weeks ago and was owed about $3600.00 and when he contacted the client, the client said, “I’ll get a check in the mail today for $500.00″. Well that was not the agreement nor was that the result the contractor was looking for. It is true that most people want to pay their bills and we all know that sometimes things happen, but the reality is that you are not a bank and should not be financing projects without being paid interest on the outstanding balance.
How do you prevent this from happening to you and your landscape business? First, for all projects, no matter how large or small, ask for a deposit on the project before you start. The deposit should be enough to cover material cost of the project so you, the contractor are not becoming a bank. This also helps determine whether or not this client is serious about the project. It will also hold the clients position on the schedule.
It is not uncommon in today’s business world to run a credit check on people, this may cost a little, but it will save a lot in the end. Running a credit check will not guarantee that you will be paid, but it does offer some security to you concerning their past payment history and you can determine whether you want to take the risk. Also accepting credit cards can be a way to help reduce the risk on non payment. This again will cost you some money depending on the rate the credit card company charges you, but you get your money much more quickly.
On larger projects make sure you are invoicing your progress billings on a 2 week cycle, not waiting until the end of each month. This will help your cash flow, but also it will help you determine if there is a problem much more quickly. Make sure you watch the aging reports for slow payers and have someone in your office on the phone the minute you think there is a problem. Clients don’t share their financial problems with you unless you ask, so don’t be afraid to ask questions. If done in a businesses like matter most people are not offended.
A question that surfaces every year from clients that I work with is, it appropriate to charge interest on late payments? I believe that if you make it known that you charge interest at the beginning of a project and you follow through with the charges it will make it much easier to do on an on going basis. It costs you money to borrow from your line of credit to pay your bills, so it is only a good business practice to bill your customer for that expense. Keep in mind this is about business.
I have never been a fan of seeking legal help to collect money but I have been forced to do so on a few occasions. This becomes a nasty battle between you and the customer and the truth is, no one wins. With the expense of legal counsel, and the potential harm to your reputation, it is a no win. Try to keep the dialogue open and the issue will get resolved.
Dealing with late payers is not easy, but if you stay on top of the issues and deal with them right away it will not be a big problem. But stay on top of the issues.