Do you always pay your bills?

[mykalberta]

I can see how it would be a problem because some people are just cheap pricks.

I see two solutions to this problem.

1 - For your business its probably difficult. I would probably force the customer to pay the full amount before I even installed the cabinet. If there are problems after installation then you need to figure out who screwed up.If its the company then there should be a discount on the price. If it was the customer then they should have to pay more for their own mistake.

2 - you build in these cheap pricks into the price for everyone. Alot of companies build in things like that into the price, yes it screws everyone instead of those who should but thats life, alot of times a small group ruins it for the larger group.

It probably reduces the number of clients your company has but it allows your business to run efficiently. A small well run business is better than a large poorly run business IMO.

[Azure]

Originally Posted by GGG

I usually will with hold 10% for outstanding work until its completed. I also put an excessive amount of things in writing to clarify things before having any work started and a statement that all changes need to be in writing signed by both parties with costs associated. Doing this has resolved most issues I have with contractors.

I think that peoples fear with paying before everything is done is that the contractor would just take off and not finish the last details. Do the people who arent paying identify reasons or do they just ignore you.

For certain customers I don't blame them for not wanting to pay the outstanding balance. They were issues that took forever to get resolved, which obviously create problems. But that still doesn't excuse them for NOT paying the bill once the work is completed.

But there are also customers where the work was completed on time, and they just ignore our repeated calls, emails, and other forms of communication to try and collect payment.

I find that kind of response mind-boggling. What kind of person are you when you don't pay your bills?

[Azure]

Originally Posted by photon

One lawyer told me their success rate for collecting from deadbeat tenants was in the single digit percent range, I can't imagine that would be much different.

I thought there was someone you could sell the uncollected debts to, might only get cents on the dollar but that's better than nothing.

What about doing some filtering of potential customers? Doing a credit check or something like that?

Or maybe this kind of industry needs a customer rating website, I've seen them for contractors, have them for customers so you can look up a customer and see if they've been bad (that's probably so fraught with issues to be worthless though).

What about some kind of escrow service, so the money goes into a 3rd party's hands?

The problem is not all of these people are what you would call 'deadbeat tenants.' Out of all the customers that owe us money, there are maybe 4 that we know there is chance of getting final payment. Luckily they don't owe more than a couple thousand dollars.

How hard is it to do a credit check? How does this affect the relationship you have with your clients?

The escrow service is an interesting idea.

[CaptainCrunch]

Originally Posted by Azure

The problem is not all of these people are what you would call 'deadbeat tenants.' Out of all the customers that owe us money, there are maybe 4 that we know there is chance of getting final payment. Luckily they don't owe more than a couple thousand dollars.

How hard is it to do a credit check? How does this affect the relationship you have with your clients?

The escrow service is an interesting idea.

The credit check should almost be expected as well as requesting reference accounts.

You need and have a right to protect yourself.

[Azure]

Originally Posted by undercoverbrother

From your post it seems like you do work on people's properties, i am assuming homes.

Could you not put a lien on the house in the amount outstanding? While this does not put money in your hand, it does give you something of a hammer. My simple understanding is that they won't be able to sell the property while there is a lien.


That's'all i got.

We have a showroom that operates separate from the rest of the company, and they always do this. They also solely deal with higher end clients who tend to expect perfection but always pay their bills as long as the issues are resolved.

If the lien on the house is placed, what benefit is it when the owner doesn't ever sell the house?

[Azure]

Originally Posted by Rathji

They could, but that requires a judgement.

I always do my best to pay my bills in a timely fashion. Sometimes life throws me a curve ball which messes the timely part of that up. I would never go to someone and ask them to do work which I couldn't afford, or didn't intend to pay for, though.

We had a customer that went through a divorce and was forced to find another place to live in a short amount of time. He hired us to help with his renovation which was pretty limited. He made the 50% downpayment, but when the work was actually done he had other issues and wasn't available to pay the rest when we wanted it. He made small payments as he was able, but ended up his AC broke, which required quite a bit of money he didn't budget for. In the end he didn't pay in full for over 8 months.

Guy was honest about it though, and we made it work. Collected final payment the other day and he was the most thankful guy in the world.

We are not out to bankrupt people if they are down to their last time, but I know for a fact that some people that we deal with are just ignoring our efforts to collect payment because like I have said before, they know small businesses struggle with collecting outstanding money.

[flamesfever]

I think people who don't pay their debts generally have a track record of some sort. So greater scrutiny, before taking them on as a client, may help.

[puckluck2]

Funny you mention cabinets because we recently changed our cabinets and kept $1500 owing until the job was finished.

Missing handles, several clear coat chips, some scratches, fridge width not right, and several broken promises to come fix their problems means they won't see another penny.

[tkflames]

Why not get a credit card imprint up front (as any other payment plan/credit style agreement would). Then if you have carried out all of your services and they still have not paid you then charge the card.

[Azure]

Originally Posted by mykalberta

I can see how it would be a problem because some people are just cheap pricks.

I see two solutions to this problem.

1 - For your business its probably difficult. I would probably force the customer to pay the full amount before I even installed the cabinet. If there are problems after installation then you need to figure out who screwed up.If its the company then there should be a discount on the price. If it was the customer then they should have to pay more for their own mistake.

We get a 50% downpayment, and then another 40% on delivery, which largely depends on the customer actually being there to pay. And often they aren't. Which can make it drag on. We want to collect 90% before installing a single cabinet, but it certainly doesn't always work that way.

[Azure]

Originally Posted by puckluck2

Funny you mention cabinets because we recently changed our cabinets and kept $1500 owing until the job was finished.

Missing handles, several clear coat chips, some scratches, fridge width not right, and several broken promises to come fix their problems means they won't see another penny.

I realize this can be a problem, and in the world of home renovation, and ESPECIALLY kitchen cabinet reno jobs, issues like the ones you described often happen. I would agree that the customer has the right to withhold payment until the job has been completed. When it HAS been completed, and it was a pain, the customer has the right to ask for a discount or some form of compensation. If the company has half a brain they will figure something out, but even if they don't, the customer is obligated to pay their bill as long as the work is done.

But looking at AR list, a full 75% of the jobs are completed and have been for a while.

[Azure]

Originally Posted by tkflames

Why not get a credit card imprint up front (as any other payment plan/credit style agreement would). Then if you have carried out all of your services and they still have not paid you then charge the card.

We offer the customer the ability to pay with their credit card, which many do, but you can't just charge their card without having authorization.

For the most part, we don't have a problem collecting from customers that pay with credit cards.

[photon]

Originally Posted by Azure

The problem is not all of these people are what you would call 'deadbeat tenants.' Out of all the customers that owe us money, there are maybe 4 that we know there is chance of getting final payment. Luckily they don't owe more than a couple thousand dollars.

Yeah then it's basically a time consuming customer management issue where you just work with them to get the $$, I can imagine it's a huge PITA.

Originally Posted by Azure

How hard is it to do a credit check? How does this affect the relationship you have with your clients?

http://www.rentcheckcorp.com/ is what we use, but I don't know if that's limited to landlords only.

As for relationship, we're up front as part of the application process we may do a credit check to establish their reliability for paying rent on time, it doesn't guarentee they'll pay but it sure helps find the total red flags. If they can't pay their cell phone bill and there's 3 different cell carriers they owe money to they're probably not going to be reliable tenants. The only people I've ever had worry about doing a credit check is people I ended up not wanting to rent to.

Your situation is a bit different because it's a short relationship rather than a long term one, but still might be worth while doing in some cases, or at least you might require 90% up front for a customer due to what you see on a credit check.

Originally Posted by Azure

The escrow service is an interesting idea.

The problem I'd see there is usually it's the buyer that decides when the money gets released, which doesn't help you, but maybe there's something similar where if there's a disagreement an arbitrator would make a decision. Maybe that's a business opportunity for the contractor style industry.

I figure if I was great at what I did, I'd have customers pre-pay or prepay except for a small amount to cover deficiencies if they aren't addressed, but depending on the market that could either be no big issue, or basically dry up business entirely, so that's a tough decision.

[Azure]

My opinion is that we should collect 90% before anything is delivered to the customer. Management, while realizing the problem at hand is slow to do anything though, which leaves sales hanging.

We have enough cash flow month to month to pay bills and meet payroll, which gives us time to work on collecting the rest. I'm beginning to think that isn't a good thing at all. No pressure for management to implement wholesale changes to the process. Lots of great ideas in this thread that would probably make a pretty good difference.

[Erick Estrada]

Originally Posted by I-Hate-Hulse

You don't get paid for 50 days, instead of the usual 30. People love this.

Yeah it's really great when you need certain parts ASAP and you can't get them because you are on credit hold because lots of suppliers have strict 30 day policies. We are typical US company in that we expect net 45 terms from our suppliers but demand net 30 days from our customers. In the end it's the small companies that feel the burden but corporate US cares nothing about anything but maximizing profits.

[puckluck2]

Originally Posted by Azure

I realize this can be a problem, and in the world of home renovation, and ESPECIALLY kitchen cabinet reno jobs, issues like the ones you described often happen. I would agree that the customer has the right to withhold payment until the job has been completed. When it HAS been completed, and it was a pain, the customer has the right to ask for a discount or some form of compensation. If the company has half a brain they will figure something out, but even if they don't, the customer is obligated to pay their bill as long as the work is done.

But looking at AR list, a full 75% of the jobs are completed and have been for a while.

Agreed, but they didn't finish the job and after about a month they finally sent out someone to fix the issues.

Well I had already bought another fridge because my old one wouldn't fit and repaired the scratches and chips as best I could.

They don't deserve another penny and I kind of regret even paying them as much as I did.

[Azure]

We have a customer that makes trailers for the oilsands, and after he takes our cabinets it takes him 6 months before he is done with the trailer, it is delivered, and he gets his money. Which means we wait 6 months to get our money.

Outside of the net 180 days, we literally have no problems with him. So we tolerate him.

We actually do enough work for him that he sends a decent check every month for work done 6 months prior.

[puckluck2]

Originally Posted by Azure

My opinion is that we should collect 90% before anything is delivered to the customer. Management, while realizing the problem at hand is slow to do anything though, which leaves sales hanging.

We have enough cash flow month to month to pay bills and meet payroll, which gives us time to work on collecting the rest. I'm beginning to think that isn't a good thing at all. No pressure for management to implement wholesale changes to the process. Lots of great ideas in this thread that would probably make a pretty good difference.

Well you could try to collect 90% but you'd likely lose a lot of business if you did that.

I know Classic kitchens would do to job with like only 15% down. They might just go else where if they can't afford the 90%.

[Azure]

Originally Posted by puckluck2

Agreed, but they didn't finish the job and after about a month they finally sent out someone to fix the issues.

Well I had already bought another fridge because my old one wouldn't fit and repaired the scratches and chips as best I could.

They don't deserve another penny and I kind of regret even paying them as much as I did.

Sorry, but with this I disagree. If the work was completed within a month, that is acceptable from what I've experienced. If you don't like the work after it has been completed, you have the right to compensation if the company agrees, but you do not have the right to just not pay the rest.

The company should make an effort to reach out and figure out what to do with the outstanding balance. If they do not agree to compensation, you should pay your bill.

The fact that you weren't happy with the work done doesn't invalidate the contract you signed with them.

[Azure]

Originally Posted by puckluck2

Well you could try to collect 90% but you'd likely lose a lot of business if you did that.

I know Classic kitchens would do to job with like only 15% down. They might just go else where if they can't afford the 90%.

Most customers have no problem paying 90% before the job is installed provided the last 40% is collected on the day of installation. The problem is the logistics of having it all lined up. I.E. customer isn't home, therefore he can't provide you with a check.

Obviously this requires a bit better organization from sales, but from my experience it is not a problem.