I was talking to a plumber a week ago and he told me about a job he did six months back in a wealthy neighborhood for about $650, and they still had never sent him a check.  I told him I would be calling them four to five times a day.  But he apparently just let it go.

On the other hand, I spoke to a fire-chief in a town southwest of here about three years ago.  He told me the ambulance service in their town was about $2.8 million in the red a few years back.  The city had no idea why so they put the ambulance service under the authority of the fire department.

When the fire department looked at the books and the method for collecting past due accounts, they found the problem.  The lady in charge of collecting for the ambulance service called the people one time if they had not paid and then put the bill in the non collectible file.  She never called them again.

Well, the fire department changed that.  He did not say they sued anyone, but they sent them letters and made phone calls until the bills were paid.  They went and GOT THE MONEY! The ambulance service was back in the black in about 1 ½ years. Diligence makes a huge difference.  It can be the difference between prosperity and going out of business.

Collecting money is one of the most uncomfortable things about being a contractor.  Sometimes collecting your money involves confrontation, and confrontation is something that most people avoid like the plague.

If you don’t GO GET THE MONEY, it is not fair to you. You did the work. AND it is not fair to your family.  You are working and spending time away from the ones you love and care for — and not getting paid.  NO.  If that has been you in the past on some accounts, you need to change that immediately. So you have to do some thinking about how to so set up your relationship with your customers that you get paid 999.99% of the time.

In the last 40 years I have been cheated out of about $2000.  that is a very small amount compared to what I have had others tell me they have lost.  Many contractors  will tell you stories of losing $1,000’s on a single job.  That amount is so low because we GO GET THE MONEY!

There are many things you can do to put the odds in your favor. I will cover them in this blog and the next.

#18 No waiting on third parties to pay your customer.

I always ask, “Who is paying?” on certain jobs.  Sometimes I hear:

• “Do the work now then, send us a bill, and you will get paid at the closing of the house.”

Some deals fall through, then who pays? Or they put off the closing for three more weeks.

Or the seller does not get what they expected at closing and can’t pay.

What if they forget?

• “Do the work and when the insurance company pays us, we will pay you.

What if the insurance company does not pay for that?  How long will that be?

Way too many variables.

• “Do the work, and the manufacturer will pay or the store will pay or the carpenter will pay.”

Or they say, “Send the bill to the builder or the plumber.”

The reason they don’t want to pay but want to wait for someone else to come up with the money is because they feel they should not have to pay for the work no matter what. And if someone is going to get stuck with no money they would rather have it be you and not them.  If the other entity does not pay neither will they.  Just so you know.

NO!  We tell them we need to be paid when the work is done.  We can email them a receipt and an invoice, and they can collect from the third party.  Our company policy does not allow us to wait on ….

I have a friend in the same business as I am in a small town east of here.  He did some work in some apartments, about $3,000 worth.  When he was finished, the owner, a local, would not pay.  No reason, he just would not pay.  So then my friend (the contractor) filed a lien on the property. About three years later, an attorney called him and said that the building was being sold and they needed to clear up the lien the contractor had on the building. The attorney said he had a check for $1500 at his office the contractor could pick up for siging a lien release.

You see, many people think contractors are poor business men and just barely able to keep food on the table, so they would jump at the chance to at least get $1500.00 out of a three year old bill.  The contractor told the attorney he could make out the check for the $3,000 plus the filing fees and the interest or he would not sign anything. The attorney said, “That’s not happening.”  Two weeks later, the attorney called back with a check for the right amount.   Backbone and patience pay well.

If you are going to have a business, you need to run it like a business!

# 32 Collect money up front for nonrefundable parts.  

On any job where you need to order parts, we collect the retail price of the parts up front. Why? After you have ordered the parts or received them, they may cancel the work.  Why?

• People may decide to move instead of repairing the unit.
• They may decide to replace unit.
• Their neighbor fixed it for free, etc.
• Their mother died, and they are putting the project on hold indefinitely.
• People have a myriad of excuses.

Now you have parts you can’t use and many companies charge a 20% restocking fee plus postage.  Why should you be out that money?  If they have any objection to paying for the parts up front because they do not know if they can trust you, tell them they need to find someone they can trust because your business requires the parts be paid for in advance. Usually people don’t have a problem with collecting for parts before ordering and will send you a check in the mail if you talk over the phone.

I have told people, “I have lived in the same house for 30 years and had the same phone number for that long, too.  I work for many well known businesses and that if I were unreliable, I would be out of business very quickly.  But I can understand their apprehension.  Talk to your spouse and if you still want the parts, let me know.”  Leave the ball on their side of the court.  Most of the time they will call you back.  There is no pressure in handling it that way.  They can send the check in the mail or call you with a credit card number.

When it comes to pricing parts, we usually have them pay retail for the parts up front and let them know we will add any tax and shipping to the final invoice when we come to do the repair. Some of the manufacturers I work for have their pricing schedule set up that way.  We pay them $50.00, and the retail price is $100.00.  This is very fair. Why?

• We have to receive it in the mail.
• We have to enter the amount into the books on the computer.
• We have to deposit it in the bank.
• If the customer cancels the work order, we now have the funds to return it to the manufacturer and still not be out any money. If the manufacturer requires a 20% restocking fee, our restocking fee is 30% plus postage both ways to cover our office expenses in handling the transaction we did in both receiving the parts and shipping them back.
• Finally, it gives a profit on our business. Without a profit, you go out of business!

Don’t do things for free. This is a business!

Remember you are running a business not a charity!

# 36 Call about the bill the next day.

When you send a bill to a first-time client, whether it is faxed or emailed, call them the next day and ask them if they received it.   If yes, ask them when they will pay if you do not already know.  If you know how they pay, confirm that over the phone.  “Since it is in before Wednesday, you will cut us a check on Friday. Is that right?” If you do not receive a check by the following Tuesday, call them again, and ask them if they mailed it. The longer you let an invoice go without contacting the customer, the longer they will take to pay.  It may be that they realize that you avoid confrontation, so they pay others first and let yours slide.

This establishes your presence as one who expects to be paid and expects them to do what they have said.

• Proverbs 14:24 The wise accumulate wisdom; fools get stupider by the day.  (The Message)
• Proverbs 2:7 He layeth up sound wisdom for the righteous: he is a buckler to them that walk uprightly.

Accumulating rules that govern life are all part of The Prosperous Life.