Selling is easy. It’s the collecting that’s no fun. Most all of us have experienced customers who love to buy, but hate to pay. These customers usually move around from contractor to contractor and get a lot of free service or installs by improper or no collection practices in contracting companies. Collection begins with the first phone call so all the ground rules are properly established.
The residential service department should be COC, collect upon completion. The dispatcher should ask the customer over the phone when scheduling the call, how they will pay for service. Calls after hours should also be COC with checks or credit cards. The dispatcher should notify the technician how the customer is going to pay so the tech does not have to feel uncomfortable about collecting. Any billing should begin after the debriefing of the service tech over the phone after the call or through electronic billing methods in the field. Bill after each call if necessary, not after the end of the day.
Light commercial and commercial work should be COC if at all possible or if the service is billed, the terms are Net Due Upon Receipt. No one should be given terms of 30 or 45 days as we are small companies and need cash to survive. Once again, debrief the technician and bill immediately.
Residential replacement should start the collection process with the issuance of a proposal in the customer’s home. Collect a deposit on the job to bind the agreement and collect the rest the day of the installation. The sales rep should go back to the customer’s home shortly after the installers have left. The sales rep can review the quality control checklist and collect the check. If billing is necessary, bill net due upon receipt.
Commercial replacement should begin with a written proposal and specific terms for payment. Many contractors get the material and equipment costs up front and bill the remainder after the job is completed. Remember, if you bill, the terms are Net Due Upon Receipt.
New construction should involve written agreements between the contractor and the builder. The agreement should state negotiated payment schedules between the builder and contractor. Progress bill when you can by billing 60% of the job after rough-in, 30% after trim, and the last 10% after startup. Get 90% of your monies for the job before you start the system.
After your billing process begins, run an aging of accounts receivables report every Friday and review billings. If any account is over 60 days old, the owner collects. The office should establish a collection system that sends letters, makes phone calls, stamps past due on the invoices, and/or sends emails to customers who want to pay late. When an invoice becomes terms plus 20% late, initiate the collection system. Net Due Upon Receipt accounts should be contacted the fifth day after the invoice. Net 10 days should be contacted 10 days plus (20% of 10 days) or after 12 days. Contact all A/R’s that are past due and continue to work the collection system weekly.
Remember, the collection process starts with the first contact with the customer and ends with the collection of the final invoice. The company must start the process and have definable and measurable tactics to collect.