Recently, we were interviewed for another Lowe’s for Pros article (click here to read the interview), and it made me think about a topic for this blog entry. It’s a new year, and that brings new goals for those in the consruction industry. Thus, we thought we’d help you work on some resolutions to help you with some business goals and practices to help your credit managers to improve recovery on your accounts!
As you know, the Cobb Law Group concentrates in small business law and construction law throughout the States of Georgia and Alabama. Until the economic collapse, we performed a lot of “positive” legal work for our clients such as entity formation, AIA contract review, mergers and acquisitions, etc. along with our traditional materialmen lien work and our payment bond claim practice. Since the recession/depression, however, we have had to learn much about commercial collections, garnishment, post-judgment collections, etc. in order to collect the money owed to our clients. In order to increase our collection rate, we learned very quickly to use every opportunity to collect information which might improve our chance of recovery.
For example, if we have contact with a commercial debtor, we try to gather information such as social security numbers, bank account information, or current construction projects which–if we obtain a judgment–gives us useful information to begin collection of the judgment sooner. Let’s say during a deposition we learn that a general contractor has several construction projects going, then we will try to get as much information on those projects; later, when we obtain a judgment, we may be able to garnish the general contractor’s draws on one or more of the current projects!
Similarly, you are able to help yourself and help us to improve the collectibility of a judgment. Usually, when you first encounter a new client or a new customer, they are very willing to share information about themselves in order to encourage you to supply them materials. Any information you gather could be helpful.
Thus, as the new year begins, you have the ability to improve your work habits by instituting a few of the following ideas:
1. Account Applications: If you already require customers to complete account applications, then you should review your current form. Consider adding additional information to include such things as (i) a corporate officer’s social security number, (ii) corporate officers’ home addresses, (iii) company website, (iv) names and address of those authorized to use the account, (v) email and mobile numbers, (vi) bank account information, (vii) for small businesses list the names of the shareholders. If you do not require a written account application, please consider using one!
2. Legibility: For all written communications (including account applications), make sure that everything is legible! I cannot tell you how many times we’ve seen a file with a faxed copy of a pencil message from someone with sloppy handwriting.
3. Guarantees: For new customers, particularly small, unestablished businesses, require the personal guarantee of an officer. This will probably greatly increase your ability to collect your debts down the road.
4. Notice to Owner: If you supply to anyone other than the prime contractor or the owner of the construction project, you probably need to send a Notice to Contractor and a Notice to Owner within 30 days of the first day in which you supply to the project.
5. Customer Comment Forms/Logs: Invest in software (or even a good notepad) which will enable you to memorialize information you receive from a customer. So, if he tells you that you that he hasn’t been paid, then get information from his as to whom owes him, the expected date of payment and write it down!
6. Contracts: Get it in writing. Include in your contract interest on past due balances and costs of collection (attorneys fees).
7. Consistency in Customer Names: Your customers may–either through sloppiness or intentional deception–give you inconsistent names. For example, they may contract with you are ABC, Inc., but their purchase orders are on ABC, LLC’s letterhead; their email domain may be ABC Company, but their checks to you are marked CBA Company. This can make identifying your customer difficult. Be vigilent and make them be consistent.
Of course, these are just a few general ideas. Each case is unique and each debt is different; however, the more information you have, it probably increases your chances of recovery. Please comment on some of your ideas below!