by: Mark A. Cobb
Over the weekend, I was speaking with an older gentleman who had held a prominent job in sales. He had served in that capacity for decades despite changes in technology, product and the opening of foreign markets. What were his secrets to longevity? This question became even more pertinent after he shared with me that his sales were always 10 to 20 percent below the other salesmen who worked for his firm. His secret? His collection rate was virtually 100%!!
Frequently, today’s business are divided between sales departments and credit departments, but this gentlemen has been trained in a prior period when salesmen were also directly responsible for collecting on their accounts. Thus, he shared, he would sell on (i) cash terms to anyone but (ii) credit was reserved for those who had a reputation or character for being honest and trustworthy. In addition, if bills were not paid promptly (usually at the time of delivery!), he wouldn’t sell to them anymore. This may sound harsh or contravene the call to sell, sell, sell. But while other salesmen had quarterly sales of $1M, the company only received revenues of around $650,000, he claimed; whereas, his sales were only $850,000 but his collected revenue was also $850,000. Thus, his bottom-line margins were much superior to his peers.
This insightful conversation reminded me of all the great things that anyone selling on credit can do to help make sure they get paid. These suggestions are generally applicable to any business which supplies items on credit, however, they are written particularly with Georgia subcontractor and suppliers in mind! Here are some ideas to consider and implement before issuing credit:
- Obtain a signed credit application and credit agreement
- Obtain useful information such as the debtor’s tax id number, social security number, home physical address, spouse’s name, bank account information, etc.
- Require a personal guaranty agreement
- Obtain useful information about the guarantor including correct spelling of his/her name, social security number, driver’s license, home physical address, bank account, spouse’s name, etc.
- Make sure your credit terms include interest and attorney’s fees
- If you are a third tier supplier or sub-subcontractor, make certain that you send a Georgia Notice to Owner and a Notice to Contractor (sometimes called a Notice of Furnishing) within 30 days of the first day in which you begin work on the job site
- If you are working on or selling materials to construction projects, you must separate your billing (and invoicing) by project
- Internally, make sure that you consistently use your customer’s full, legal name
- Invoice your customer consistently and timely
- Keep copies of delivery tickets or emails confirming receipt of your labor or materials
- Require any changes in product or costs to be in writing and signed by the party who will be paying you
- When payments are not made (or are NSF), consider re-evaluating the amount of credit your are willing to extend to your customer
- If you are a specialty subcontractor or material supplier working on a Georgia construction project, make sure that your materialmen’s lien and/or payment bond claims are made within 90 days of the last day in which you worked (or within 60 days if you signed a Georgia lien waiver or bond release).
- Contact a reputable Georgia construction collection attorney as soon as possible as “the early bird get the worm”
If your salesman and credit managers work together to recognize the importance of collecting proper information from customer up-front, then your collection rate should improve substantially. If you need an experienced Georgia construction collection lawyer to review your credit application, credit agreement, personal guaranty or any other document, please feel free to call us at (866) 960-9539 or email us today.
So many people contact us regarding nonpayment issues on Georgia construction projects, and I thought you might appreciate reading a summary of options we usually discuss during our first conference with our clients:
First, we assess some fundamental issues by asking the following questions:
• What type of services, labor or supplies did you provide?
• What was the last day you actually provided services, labor or supplies to the project?
• Have you been given any notices regarding failure to perform, defects, or other notices?
• Were you providing services, labor or supplies on a privately-owned project, a project owned by a governmental entity (local, State of Georgia or federal project)?
• Are they payment bonds covering the project?
• Was your contract written or oral?
• With whom was your contract (what tier are you)?
• Did you have a personal guaranty from someone guaranteeing payment of the amounts you are owed?
Assuming that you were a general contractor, subcontractor or supplier who provided quality services, materials and labor in a timely fashion, then whomever you contracted with probably owes you the money you are due. And, that is great. However, Georgia construction laws, when correctly applied, may allow you to seek recovery of the debt from a third party. Thus, our next assessment is whether there is any viable third-party who may also be liable for the debt. This can get very technical and complex, but here are some of the common areas we explore:
• Can a materialmen or mechanic’s lien be filed (which may make the real estate where your services, materials or labor was provided liable for the debt)? Click here for more information on this topic!
• Can you make a payment bond claim (which may make a third-party insurer liable for the debt)?
• Can a Constructive Trust be claimed (which may make retainage or other monies owed to a higher tier) which may make provide a source of recovery for your debt?
• Are there circumstances which allow a quantum meruit claim (which may make a third party liable for the debt based upon “fairness” issues)?
• Is there a guarantor which can be pursued?
Needless to say, the more opportunities there are for recovery, then (i) the more likely the recovery will be made, (ii) the higher the recovery is likely to be, (iii) the more quickly the recovery will occur, and (iv) the lower your costs of collection will be.
Ultimately, then, how do you and your Georgia construction lawyer work to improve your recovery?
• Periodically, review your contracts to make sure they comply with current regulations and statutes;
• Obtain a personal guarantee and other useful information (click here for details!);
• Learn all the various deadlines in Georgia for filing Lien Claims and for making payment bond claims (click here for some important Georgia Lien & Bond deadlines);
• Learn the statute of limitations for filing suits to perfect your Georgia Mechanic’s Lien Claims, your private project payment bond claims, your local municipality, State or Georgia and federal government payment bond claims;
If you are looking for a Georgia Construction Law Firm who can handle your files anywhere in the State of Georgia and who understand Georgia’s Construction Lien Laws, Subcontractor Laws, Miller Act and Miller Act Claims, please contact the Cobb Law Group to see how we can improve your collection rate!
Question: I have a judgment against someone who owes me money; how can I collection on this judgment?
That’s a question we hear almost daily around here. Many law firms will handle a commercial collection matter through judgment, but then they don’t know what to do. In other words, the typical lawyer will make sure you “win” your lawsuit, but he or she won’t do much to help you collection on the judgment. To us at the Cobb Law Group, that’s not much of a victory.
We’re different. We assist our clients will every aspect of their collection issues–from filing mechanic’s liens or making a payment bond claim to filing a lawsuit, preparing a foreclosure, securing a judgment, and pursuing post-judgment collection activities.
Even if we didn’t represent you in the law suit you won, we also help those with outstanding judgments collect against those judgments throughout the State of Georgia.
There are several steps a creditor a creditor should consider if they have a judgment.
First, if you have been awarded a judgment against another party in Georgia, it is vital to make sure that the court has issued (and recorded) a Writ of Fieri Facias which is commonly referred as a FiFa in Georgia. This Writ or FiFa is a judgment lien which attaches to all of the defendant’s property in the State of Georgia. Some courts issue a FiFa immediately upon granting judgment; however, many require a written request and a $5.00 or $7.00 fee. Thus, if you have a Georgia judgment, make sure the FiFa has been issued.
Second, record the original FiFa in each and every county where you think the entity who owes you money owns any assets. For our clients, for example, we search real estate ownership throughout Georgia and record the FiFa in every county where the debtor owns real estate. That way, if the debtor attempts to transfer any real estate or attempts to refinance any real estate, then your recorded FiFa may lead to payment of the debt.
Third, if you can identify a bank account which is owned by the debtor, then it may be possible to file a Summons of Garnishment against that bank account; similarly, if the debtor is an individual who is employed, then you may be able to garnish up to 25% of his or her wages. Garnishments in Georgia can be a very effective means of collection your judgment. Lately, we have been fortunate to garnish current construction projects in order to collect judgments rendered against subcontractors. Remeber to think creatively as garnishments can often be filed against anyone who owes your debtor money (including credit card companies, employers, tenants, etc.) ; be careful, however, as Georgia does not allow garnishment against all assets (such as retirement account, child suppert, etc.) so check with your lawyer before filing attempting a garnishment.
In addition to gerniahsment, there are several other great options available to the post-judgment creditor. For example, we frequently, use post-judgment discovery to assist us with locating and identifying a debtor’s assets. We use such techniques as depositions, written interrogatories, and third-party discovery to help us locate assets in Georgia and collection on the judgment.
If you have a judgment against somebody, don’t let it sit there gathering dust; contact us to see if we can help you find the money that you are owed.
The Cobb Law Group is pleased to announce the addition of Paul A. Rogers to its staff of attorneys. Paul comes to the Cobb Law Group with extensive experience with creditors’ rights in bankruptcy. He has worked for major Atlanta law firms and has served as a Chapter 7 United State Trustee for Bankruptcy, Paul’s legal experience adds a significant dimension to our practice which will offer our clients greater options for commercial collections.
In 2002, Paul received his juris doctor from the University of Nebraska; prior to that, he had a double-degree in history and religion from the University of Georgia. He is admitted to practice in multiple state and federal courts throughout Georgia and has published several significant articles in his field. Paul practice concentrates in Commercial Collections, Commercial Litigation Creditors’ Rights and Bankruptcy including representation of financial institutions, asset-based lenders, and commercial leasing companies. He represents secured creditors, committees of unsecured creditors, and trustees.
Because of his vast experience, Paul will assist Cobb Law Group clients regarding collection matters, commercial workouts, receiverships, bankruptcy and commercial litigation issues in state and federal courts. Paul has substantial experience with Chapter 7 Liquidation cases, and with the confirmation process in Chapter 11 Reorganization cases; in addition, he has served as lead counsel in numerous contested hearings in bankruptcy courts. Paul has also served on the Private Panel of Trustees for the United States Bankruptcy Court for the Northern District of Georgia.
We are very excited that Paul will be working with us and helping to increase our client’s recovery in our collection matters. For more information on Paul or to contact him directly, please click here.
There is a fact about commercial collections that we think only credit managers and commercial collection lawyers truly understand: collection of account begin before any materials, product or labor are supplied!
What does that really mean? When a customer wants to purchase your product on credit, that customer is probably the friendliest and most forthcoming that he will ever be. So, here’s your chance to ask for information that will help you in the collection process in the event the customer’s bill is not paid.
Complete Application: In consultation with your commercial collection attorney, prepare a comprehensive application for credit. Then, when a prospective customer asks to purchase your materials, your first step should be to require the prospective customer to completely fill-out an application.
Guaranty: Collection of accounts can be difficult–customers with assets tend to pay their bills, but those without assets are typically sent to collections. While you may be able to obtain a court judgment against this customer, the judgment will be meaningless unless you are able to find some asset of the customer against which to collect. One way to increase the odds of recovery is to obtain a personal guaranty of one or more individual(s) who is willing to guaranty the customer’s debt. A business may be collapsed or put in bankruptcy with ease, but individuals are less likely to do so. Practical Tip: Look beyond the company’s owner for a guaranty: try to get a personal guaranty from the owner’s spouse, parent or child (where assets may be hidden).
Gather Information: Both the application and the guaranty form should be used as an opportunity gather information about the debtor. Be creative, but at a minimum get such information as:
- the customer’s legal name, type of entity, and jurisdiction where formed;
- the customers, EIN, physical addresses (not just post office box), and banking information;
- the guarantor’s full legal name and any aliases; and
- the guarantor’s physical address (not post office box), and social security number, and date of birth.
Make it Legible: None of the foregoing ideas will help you at all unless it can be read. It is amazing how many times a credit application is faxed, scanned and photocopied before it makes its way onto the collection lawyer’s desk. If a social security number is not legible or a name is not clear, then that information is useless. Before processing the customer’s application, please make sure it can be clearly and easily read.
Liens: There are all types of liens available to creditors in Georgia including UCC-1′s, security agreements, collateral pledges, mechanics liens, materialmen’s liens, etc. Contact your Georgia commercial collection lawyer to understand which liens may be appropriate for your type of business.
There are a lot of other things that can be done to help in the collection process prior to extending credit. We plan to discuss more of these in future posts. In the meantime, please share with us your ideas and success (or failure) stories!