Pay Day: Getting Clients To Pay

"Our customers seem to think we’re unimportant," said Neave, vice president, Neave Landscaping, Wappingers Falls, N.Y. "We should stop maintaining their properties, but we don’t."

Collecting unpaid and overdue bills is a time-consuming chore for contractors to tackle while still maintaining and caring for their clients’ properties. "Nobody likes to do it, but the alternative is worse: writing it off as a loss," pointed out Thomas Montminy, a principal specializing in collections at Montminy Law Firm, Quincy, Mass.

The key is to not be caught off-guard, Montminy said. "A company that is vigilant about getting paid for its services from the beginning will have fewer problems when its services have been completed," he explained, adding that a company’s collection process can be efficient and doesn’t have to become a long, drawn-out and costly affair.

TREAT ME RIGHT. In the long run, getting clients to pay their bills on time and in full starts with training those customers to "treat you like a utility," described Rick Lenth, administrative manager, Tovar’s Landscape Contractors, Elgin, Ill. "We have to get customers to look at it from our mindset," he said. "We’re a professional organization. They agreed to pay for our service, so they have to pay just like they pay their electric or gas bills."

Having a contract is the first step toward training clients to think seriously about paying their landscape bills. "Even simple, one-page contracts can do the trick," Lenth said. "This way, when clients decide they don’t want to pay their bills, you have contracts that lay out exactly what your services included and the payments you are entitled to receive from those services."

For maximum effectiveness, contracts should include a statement detailing the client’s responsibility to cover court fees incurred from legal action the company might take to demand payment. Lenth’s contracts didn’t include this statement a few years ago when a commercial client refused to pay for a $40,000 snow removal bill because he didn’t budget enough for it.

"It wasn’t our problem that he thought the service cost too much," Lenth explained. "We fulfilled our contract and the client was happy with our service. The client also knew, up front, what the costs were. We had this client for two or three years and, in the past, the winters were light, so he budgeted too low this particular year."

Even though Tovar’s Landscape Contractors settled with this client before going to court, attorney’s fees were still considerable - near $7,000, Lenth said. "Pushing the situation as far as we could take it cost us these attorney’s fees, but we still ended up with a majority of the bill paid for by the client," he explained. "And we learned a lesson about having this statement on all our contracts."

Another form of contract that can be helpful when collecting payments is a project acceptance form, pointed out Kathleen Moran, senior landscape architect, Yardmaster, Painesville, Ohio. "This form, which clients’ sign at the completion of the project, says that the work we did was done to the clients satisfaction," Moran explained. "This way clients can’t come back two weeks later when the bill arrives and say they weren’t happy with something we did."

Contractors can also create a powerful, professional impression by setting up clear, precise billing operations. Lenth has staff members who answer phones 24 hours a day and handle billing and faxing. "As soon as a bill is 35 days past due, we are on the phone to that client," he said.

Clients who don’t pay bills on time to ILT Vignocchi receive second and third notices with bold, black "LATE" or "PAST DUE" stamps on them, said Matt Hoppe, an account manager at the Wauconda, Ill.-based company. These types of urgent messages put a little bit of fear into clients and don’t cost additional time or money to include, Hoppe said.

In addition, the threat of service or finance charges can leave clients with this same type of anxiety and urgency to send in their payments, Lenth said, adding out that they "don’t always work."

"We add interest for late bills, but when the bills arrive, we deduct the late charge off of most of them," he explained. "The interest is there for people who become a problem. If someone pays his or her bill in 45 days but they don’t pay the interest from the 15 days the bill was late, we’ll take off the interest. But if clients are 60 or more days late and we’re fighting with them to get their bills in, then the interest will remain on their bills.

"Interest also comes in handy if you have to take someone to court," Lenth added. "This extra money could help pay for your time spent with attorneys or in court handling the case."

Even though he’s determined to get bills in on time, Lenth said he’ll work with clients who are sincere about paying and are willing to send in a little bit of money each month as an expression of their sincerity. "I had one customer who took two years to pay off $2,000," Lenth remarked. "He paid us $50 here and there. We’ll work with our clients as long as they are paying and we reach our goal of writing nothing off every year."

GETTING SERIOUS. Once clients understand that contractors are willing to take the necessary steps to receive payment for services rendered, bills start coming in pretty regularly, according to most contractors.

And contractors shouldn’t feel bad for taking additional, more serious steps with clients who don’t pay their bills, Montminy stressed. "You’ve exhausted your good faith efforts, so don’t waste any more time in the hopes that the customer will come around or that the next promise of payment will be kept," he said.

If Lenth can’t reach his clients by phone to notify them of late bills, he’ll send them a letter. If he does not receive a response after 60 days, he turns the matter over to a third party. The company is not a collection agency, but a service that sends out collection notices with letterhead that has a more official look, giving the appearance that the bill is being sent to a creditor or bill collector.

The service is fairly inexpensive, according to Lenth. "There is a sign-up fee, maybe giving us a certain number of people within a certain time frame that we can use the service on - maybe a couple hundred dollars for 100 people," he explained. "From there, it costs about $10 or $15 per customer. This service will send about four warning letters to the client. Out of the 10 to 15 people we sent this letter to last year, 12 or 13 of them paid their bills immediately."

Finally, if this approach still doesn’t influence the client to pay his or her bill, then the matter is turned over to a collections agency. Their fee is typically 50 cents for every dollar the client owes, Lenth said. "We’ve done this with only a few clients," he said. "This works with smaller accounts, especially, because we don’t want to waste time and money on court costs. You’ll find that most of the time this step is enough to influence these clients to send in their checks."

But Montminy pointed out that most agencies simply send out computer-generated notices. "Collections agencies tout their ability to hound debtors, but they have no legal authority to compel payment," he said.

A contractor who doesn’t want to scare clients with a warning letter can skip this step and hire a law firm to file a lawsuit, Montminy said. "If the debt is undisputed and the debtor is viable, you will be paid," he said. "Excuses, followed by delays, are no longer options for the debtor, unless he or she is prepared to spend needless legal fees or is willing to risk default by the court."

The ultimate final step, of course, is taking the client who hasn’t paid his or her bill to court. Bills more than $5,000 are too high for small claims court, and costs increase considerably beyond small claims court, Lenth said. As long as the contractor has a contract stating that the client is responsible for attorney’s fees if the bill isn’t paid, then the client will pay these costs if and when the contractor wins the case. Unfortunately, a contractor’s lost time fighting clients in court cannot be won back even if money from late bills can.

Montminy also pointed out that "if the client is not paying your bill, there are most likely other creditors out there who are also seeking payment," he explained, adding that most likely not everyone seeking money from that client will get paid. "This makes it even more important for you to collect as much of your bill as quickly as possible."

TRICKS OF THE TRADE. According to most contractors, snow and holiday lighting clients notoriously miss payments, mostly due to the fact that these customers may not need the company's service in the future.

"They always whine about not having the money to pay their bills," Moran said of snow clients.

Lenth agreed. "A lot of times when they get the bill, they don’t remember what storm it is for," he said.

Contractors have a couple of tricks for getting these frustrating clients to pay their bills on time, such as rewarding those clients who respect payment due dates.

Unpaid snow jobs were a dilemma for Irene Sidlowski, Live Oak Landscape Contractors, Piscataway, N.J. To protect her business, she had to increase her snow prices and then offer a reduction for those clients who pay on time.

Lenth said that he has also waited until snow was in the forecast, and then he threatens to put a client with an unpaid bill last on his list of snow removal clients or to not show up at all. He knows commercial clients depend on clear parking lots for employees and customers, and that they will respond to the timing change.

Lenth also charges per storm. And since clients have problems remembering which storm they are paying for, his billing team faxes storm reports to clients after every single storm, stating the conditions. Then he sends a copy of the same fax with the bill so that clients have little opportunity to become confused about what they are paying for.