A new customer just came on board! Just imagine how much potential business this customer will bring you and the company! However, what happens if this new and exciting customer turns into a bad customer? Thinking about not getting paid is something you do not want to consider at this time. These are happy and exciting times – you are making money $$$
The customer wants you to start right away and provide them with your goods and services ASAP. Great! Why should you bother your customers with the extra paperwork that the credit department gave you? What cares about the project details?! It is all about the customer right now. They want to buy!
Why does the credit department need ask so many questions about the project?
Have you ever considered - what if something happens on the project that is out of your control and all of a sudden your amazing new customer cannot pay you? What if project financing falls through or there is an issue with another contractor on the project that is going to jeopardize your involvement on the job?
What are you doing to protect yourself before a project potentially goes bad? No one is going to help answer your questions about the project when the job is going south. Everyone will be too concerned with protecting themselves to stop and help you find the information you need to collect your account and potentially file a lien.
Think about this - do you know everything you need to about a project to make your lien effective?
Real Life Example:
A client came to us and wanted to file a lien on a project. As a supplier to the project, the client only knew where to send their products based on the shipping address on the invoice. We filed the lien for the client based on the limited information they had on the customer and the project.
Initially, you may think, to effectively file a lien all you need to know is where the project is located. Liens are easy! If you think lien filing is as simple as knowing where the project is located, you are wrong!
After a few short months, the lien was removed because it was considered invalid.
Here is why the lien was invalid – the lien was filed against the property where the materials were shipped and registered against the owner of the property. The client did not know that their customer (now debtor) was leasing the property. Unknowing to the client, they were providing their product to a leaseholder and because the owner did not request the work the lien was disputed. The client now no longer has the protection of the lien for the $50,000 worth of work they have provided all because of who was responsible for the project. Under each Builders’ Lien/Construction Lien Act you can dispute a lien claim if you believe the lien is invalid. In this case, the owner did not authorize the project and the work ongoing on the property and did not accept responsibility for the project. The owner formally disputed the lien and said either remove the lien or prove the lien is their responsibility. This client is a world-wide supplier with teams of lawyers and highly trained credit staff; however, they did not know the basic project information for their lien to be effective and stay on the property.
How do you avoid this situation? Do your homework!
Ask your customer questions from the beginning. Whether you are working with a new customer or an existing customer on a new project, gather information on the job while the relationship with your customer is friendly and their account is still in good standing. Asking basic questions when there are no problems on the project. Once your customer begins to delay or stop paying their account altogether, they will be less likely to answer your questions.
By info gathering and asking the important questions you are simply conducting good business. You want to be able to paint a better picture of whom you are working for and understand the overall project. It is not uncommon that your customers may be hesitant or put off guard by your questions; however, it is all about your approach and how you go about asking the questions. You are not trying to be confrontational. You do not need to sit your customer down, and rapid-fire ask them all about the project. Do not turn your inquiry into an interrogation. It is all about how you ask the questions.
As a company, you are trying to protect your bottom line and avoid any non-payment situations. Non-paying customers and delinquent accounts is simply a part of the business. Be smart and protect yourself. It is important to have the business systems in place so the sales and credit teams can work together.
Start asking the right questions and request a copy of our "10-Point Project Profile" now to use it as a part of your onboarding and accounts receivables processes.
If you would require further information or would like to discuss your situation, give us a call. Remember: It’s Time To Get Paid™