First – Get it in Writing
The first thing you need to do is get your agreement in writing. Use a construction contract; it will be much easier to prove your point in court than relying on some type of verbal agreement based on a hand shake.
Second – Secure Your Payment
Next, you need to secure your rights to be paid with some type of legal instrument. Whether it’s a construction lien on real property or a UCC on materials; it’s critical that you secure your right to be paid.
Third – Bill Regularly
The worst thing that you can do is send bills sporadically. Your customers need to know you’re serious about getting paid and they can set their watches on the bills that they receive from you.
Fourth – Limit Your Credit Risk
To the extent you can limit your exposure by limiting the credit you give, you should do that. It’s much easier to suffer a loss of $5,000 than $50,000. You need to make credit decisions based on the credit risk of the customer.
Fifth – Contact Delinquent Accounts Often
So you have a delinquent account; what do you do? Yes, you must do the obvious – contact the account holder. Do it verbally and in writing, nicely and firmly but do it, and do the best you can to get the customer to start paying you.
Sixth – Resolve Disputes Quickly and in Writing
Sometimes your customers will tell you that the goods arrived late or that they are unhappy with your service. Try to resolve these issues yourself. Better to give a small credit in exchange for a payment, and move on.
Seventh – Negotiate with Decision Makers
Whenever you’re negotiating either the contract or a delinquent debt, make sure you’re negotiating with someone that has the authority to make decisions. Avoid the frustration of negotiating with a book keeper with no real authority. Deal