Setting up pricing, contracts and in-house procedures for follow up prior to turning over to attorney.
Business owners want to be paid for services rendered. When developing a relationship with a customer one does not assume the customer will not remit payment. However things can – and do – go wrong. One can ensure a higher likelihood of payment by creating and following a process as well as partnering with an attorney.
To create a collection process the business owner or manager must first review the customer relations. Begin by asking some basic questions such as:
- What do you provide to your customer – goods, services or a combination?
- What do you need from a customer to do your job from beginning to end?
- What will you do for this customer?
The answers to these questions will lead one into the review of pricing, terms and conditions and invoicing.
Again a series of questions will guide the manager through the review process.
- What is the pricing structure? Is this a job that can be done in steps? Can you create different phases so the customer can pay as portions are completed?
- What are the terms and conditions? When do you get paid? Do you take monies up front?
- How do you invoice? Do you invoice timely? Do you clearly state your expectation on payment from the beginning? What happens when a customer does not pay within your time expectations?
As these questions are reviewed and answered, the manager can begin creating a collections process. A script stating what you do for your customer and what you expect from the customer will become the basis of a contract. The goal of the contract is to establish and solidify the relationship with your customer which should result in repeat business as well as referrals.
The contract needs to be simple but legally sound. It is advisable to partner with an attorney to draft this which allows an independent sounding board as well as someone to play devil’s advocate. Using the information you gathered during the review process, the contract should include:
- Your services
- Your expectations from the customer
- Term of the contract.
- Collection process
- Include language of costs of collections such as court costs, attorney fees, and interest.
- Terms of payment.
- If the deal is being financed by you then you need to act like a bank. You need to know who you are financing and require a down payment. If it is by check, make a copy of the check for the file. If by credit card, state that it will be processed for named payment at specified dates or occasions.
Once the contract is established a process for collections needs to be established. These procedures will be stated to your client up front so all parties are aware of what will happen at each step. All of this needs to be in writing in front of them.
If a customer does not pay on time, they will receive a reminder call with a follow up letter. During the phone call it is important that the customer state his commitment of payment to you. Ask leading questions such as “When can I expect your payment in my office”? The customer needs to take ownership and commit to the action they will be taking.
The follow up is usually a friendly letter simply reminding the customer what needs to happen next to avoid being sent over to collections. Action steps and time lines need to set. For example, “Per our phone call today, you advised me that I would be receiving your full payment of $100.00 by the 15th of this month”.
If you do not receive payment by these terms it is time to move on to strong language. A second letter should be sent on the stated date that you have not received funds due. This letter will state that if full payment or a payment plan is not received by a deadline date you will move forward with legal measures which includes providing this matter to your attorney. Include your attorney’s name in the letter. At this point, your attorney should be given a copy of the letter and all notes that you have.
Unfortunately there are the few who still will not follow through with payment after the second letter. Your attorney should have a demand letter ready for mailing. This letter provides the customer with 30 days to comply or a case will be filed in court against them.
The majority of the time you will receive payment at this point. There are times when it will go to the final step of drafting a Small Claims Action or Court Complaint for Breach of Contract. The customer will receive another letter stating the case is ready and be advised of the costs and expenses they will be asked for in addition to payment due. It is important that you follow through on the day threatened to set the precedence within the community that you mean what you say.
To help your attorney prepare the best case possible it is advisable that you get everything in writing. Written evidence provides credibility and allows the lawyer to work on your behalf if a controlled and efficient manner. Additionally, it will save you time and cost by not having to be appearing in court. It also puts the customer and his attorney on the defense to show why they did not follow through which will be evidenced through the letters. It is also highly suggested to know your customer’s assets. Where does he bank? Does he own equipment? If you receive any payments at all keep a copy of the check in the customer file. This information will assist your attorney if a garnishment order needs to be drafted at the bank.
Creating and following a process while partnering with your attorney will help you to establish strong relationships with customers. Clear communicating expectations will likely lead to a smooth transaction and long-term relationships with your customers. Partnering with your attorney in a proactive manner will create a better business and life for you and will result in less dead beat customers.
Contact
No one wants to have tax law problems, make sure you take proper steps to help protect your family or business today and into the future. Providing a wide range of legal services, the attorneys at Maistros & Loepp are ready to help. Call 330-474-3864 or contact them on-line today for an appointment.