Chapter 9 – Collect the Money – Rules and Tips for Collecting

Here are the rules for collecting money from customers:

BE POLITE

BE CALM — NEVER LOOSE YOUR TEMPER

BE PROFESSIONAL

KEEP A WRITTEN RECORD OF ALL CONVERSATIONS

KNOW THE LAW

BE PERSISTENT

NEVER CRITICIZE THE CUSTOMER HIMSELF — ONLY WHAT THE CUSTOMER DOES

BE HONEST WITH THE CUSTOMER

NEVER DO ANYTHING ILLEGAL

NEVER THREATEN TO DO ANYTHING ILLEGAL TO THE CUSTOMER

BE POLITE

No matter what kind of customer you are dealing with, you should always be polite. There are good reasons for this.

If you are dealing with an honest customer, it is obvious that you should treat him with the friendliness and respect that his honesty deserves. It is easy and natural to be polite with an honest customer, but you must also remain polite with even your worst customers. Here is a list of reasons why.

A. A dishonest customer will often try to provoke you into getting angry with him. He will do this so that he can use the fact that you got angry with him as an excuse not to pay you.

B. Getting angry or yelling at a customer will show the customer that you are not in control of the situation. People tend to raise their voices when they feel that they must use force or emotion to handle a problem instead of logic and reason. Most people are either consciously or unconsciously aware of this fact. So, you can most impress the people that you are trying to collect money from by appearing so competent in the area of collecting that you don’t need to resort to using emotion or force.

By the way, the fact that remaining polite is best, no matter how much a customer provokes you, does not mean that it will always be easy. I happen to know from much personal experience that it is sometimes not easy at all.

If a customer becomes too abusive over the phone, you always have the option of simply hanging up and turning the dirty, scum sucking, diseased descendent of an outhouse maggot over to a collection agency. BUT DO IT POLITELY.

C. Being polite invites your customer to be polite to you. If a customer becomes rude with you, so you get rude with the customer, so he gets really abusive with you, so you start yelling at him… STOP! Take a look at what is happening here. You are letting the customer control the conversation. You are no longer in control of the situation.

You started off in the conversation talking about how the customer was going to pay you the money that he owed you, which is what you wanted to talk about. And, you have ended up talking about how bad you are, which is what the customer wanted to talk about.

On the other hand, when the customer first got rude with you, if you had remained polite with him, the customer most likely would have continued to be a little rude to you, but the conversation would have stayed under your control. This is a key aspect to successful collecting.

BE CALM — NEVER LOOSE YOUR TEMPER

This has pretty much been covered under BE POLITE. To be honest, I think it is probably too much to expect that you will never loose your temper with a customer who has broken his pay agreements with you. Let’s face it — it’s INFURIATING!

Many, many times you may feel like personally doing damage to the customer. After all, look at the damage he is doing to you! He owes you money, and you really need that money right now! He not only didn’t give you the money on time, but he’s going out of his way to get you really, really upset with him!

He lies to you over and over again. He never returns your phone calls. Instead of doing whatever he can to try to make up for the problems that he’s causing you, he treats you like some kind of beggar who is looking for a handout. When you are working out with him how you are going to get paid, he acts as if you are asking for a special favor!

So, these guys can be really, really, infuriating! But still, you must never let the customer see that you are angry with him. The advice in the previous section under BE POLITE still holds true.

And when you are trying to collect from one of these dishonest customers and you find yourself getting more and more upset, there is one thing that you might think about. You just have to deal with this creep until you collect your money or turn him over to a collection company. He is stuck living with himself for the rest of his life.

BE PROFESSIONAL

The way to BE PROFESSIONAL is to always follow THE RULES OF COLLECTING no matter what the circumstances are. There are good reasons for this.

When you are trying to collect money from a customer that has broken a pay agreement, it is often necessary for you to take control of the situation and more or less tell the customer what to do. Remember, the customer has already not been able to keep his original pay agreement with you, so it is obvious that the he is not completely competent in the area of paying bills.

In the beginning steps of the CUSTOMER COLLECTION SYSTEM you should at first encourage the customer to take as much control of the situation as he can. Often this results in the customer coming up with a way to pay you fairly soon.

But, as time goes on, the less responsible a customer proves to be, the more responsibility you will need to take on to make sure that you do get paid. So, as you go down the steps of the CUSTOMER COLLECTION SYSTEM, you will need to be taking more and more control of the collection process.

On the last step when you turn the customer over to a collection agency or the court system, you are, of course, completely bypassing the customer in every way. Essentially, when you get this far into a collection situation, it has become obvious that the customer is not taking any responsibility for getting you paid, so you must take full control of the matter and take legal action to force the customer to pay you.

Often, as you begin to put more and more control into the situation, the customer may begin to resent your “meddling” in his affairs. And yet, it is extremely important, at least in the earlier stages of the collection process, that you maintain a friendly relationship with the customer. The customer will be much more agreeable to your increasing control of the situation if he feels that you are more professional in the area of collections than he is.

One good way for you to demonstrate competence to the customer is for you to act professionally. Many customers respond extremely well to your suggestions or advice when they have confidence in your ability to handle a situation.

When you maintain a professional attitude with a customer, you will give that customer every reason to believe that you can, indeed, handle his problems as well as your own. He will be more accepting of your increasing control and will not get upset with you.

Also, if you are dealing with a criminal type, he will respect your professionalism and possibly decide that it might be better for him not to keep your money after all.

KEEP A WRITTEN RECORD OF ALL CONVERSATIONS

It is important to keep a written record of all agreements that are made during the time that you are working to collect money from a customer. The easiest way to do this is to have a made-up form that you can take out and use each time you call the customer. Here are some of the things that should be on the form:

A. Job name, address, and phone number.

B. The name of the person who is responsible for paying you. Any and all addresses where he can be found. Any and all phone numbers where he can be reached.

C. What the original pay agreement was and how and when it was broken.

D. Each time you call, note the following:

1. The date and exact time you called and what happened when you called. You may have gotten voice mail, a live person, an unanswered ringing, a busy signal, a disconnected number, or whatever. As an example, if you got an unanswered ringing, note down how many times you let the phone ring before hanging up. Write down exactly what happened.

2. If you left a message, what it was.

3. If you spoke to a person, who he was and what he said, especially any promises about having someone return your call.

4. If you spoke to the person responsible for paying you, what he said. If he made you any promises or gave you any dates or dollar amounts, write them down exactly.

E. Any useful information about the customer or his job that you become aware of between the phone calls.

There are several good reasons that you should keep a written record of what is happening while you are in the process of collecting money from a customer. First of all, the further you go down the steps of the CUSTOMER COLLECTION SYSTEM, the more often the customer is going to lie to you. It can be very useful to be able to tell a customer exactly how many times that customer promised to pay you by a certain date and then didn’t actually pay you.

Another reason is that you can actually see, just by looking at this one form, what the customer has promised and what he has actually done. This can be helpful when you are trying to decide whether or not to move on to the next collection step.

One way to appear extremely professional to the customer is to be able to rattle off in great detail exactly what date and time he made a pay agreement with you and exactly what that agreement was. Once you have done this with a customer, he is unlikely to think that he can get away with taking advantage of your lack of business sense. You are obviously too professional for that.

If worst comes to worst, you may find yourself in the position of having to take a customer to court or you may decide to turn a customer over to a collection company. When that time comes, it will be helpful to have all the broken agreements and other information well documented. Simply keeping brief records while you are talking with the customer or even just noting down that you tried to call him and he didn’t return the call might be the deciding factor in getting you paid.

KNOW THE LAW

In each country, state, and city, there are laws having to do with collecting money. You don’t have to be a lawyer to understand the basic ones. If you want to be successful in collecting money, learn them. It really doesn’t have to take a long time either. Try looking on the internet. The information will be well worth the small amount of effort.

BE PERSISTENT

Collecting money from a reluctant customer can be one of the most unpleasant tasks you will face as a contractor.

If you want to maximize the potential of collecting your money, you will need to be persistent. What you need to do is always take the next step in collecting your money at the time you planned on taking it even though the customer may make this unpleasant for you.

If you have decided to collect your money from a customer, then you must not do a half-way job. You must realize that any customer who has broken his original pay agreement with you is not going to suddenly change into a super fantastic customer who will now pay you at the first possible opportunity. No, he is almost always going to require you to put in extra effort if you want to collect your money. After breaking his original pay agreement with you, he may promise to pay you next Monday. But if he doesn’t pay you on Monday, you are going to need call him again and ask him where your money is.

If you contact this customer on the exact date that he has promised to pay you, he will think that:

1. You must really want the money.

2. You definitely expect him to do exactly what he promises.

3. You will not leave him alone until he pays you.

The combination of these three things will encourage the customer to pay you faster. So, as part of your program to collect money from a customer, you must appear to be extremely persistent, no matter how difficult or unpleasant the collection process is. Remember, if the customer is too unpleasant, you can always turn him over to a collection agency

NEVER CRITICIZE THE CUSTOMER HIMSELF — ONLY WHAT THE CUSTOMER DOES

If you criticize the customer, you may feel much better, but the customer will not. Customers who don’t keep their pay agreements are always on the lookout for an excuse not to pay you. Criticizing the customer will give him the excuse he is looking for. Therefore, criticizing the customer is a bad collection technique. On the other hand, criticizing what the customer does can be used successfully to collect money. Here is an example of this:

WRONG — You’re nothing but a cheat and a liar!

RIGHT — You have broken two pay agreements with me. This is unacceptable.

Because people do not like to think of themselves as being stupid or bad or criminal, attacking the customer will result in an antagonistic customer. Attacking whatthe customer does allows the customer to change his actions without having to admit that he is a “bad person.” This can sometimes be helpful when you are trying to collect.

BE HONEST WITH THE CUSTOMER

The simplest and easiest way to deal with a customer is to be honest with him. This holds true even when you are trying to collect. Among other reasons, being honest with a customer sets a good example; your own actions encourage the customer to be honest with you. Even if the customer is obviously lying to you, you do not need to sink to his level. A customer can often guess that you are lying, and he can usually tell when you are being honest with him.

There is a kind of power that goes with being honest. When you are completely honest with a customer in all situations, you are demonstrating to the customer that you feel so secure in your ability to accomplish the things that you set out to do, that you have no need to hide anything from him. In the area of collections being honest not only invites the customer to be honest in return, but also shows the customer that you are a confident businessman. A customer who owes you money will be more inclined to pay you if he believes that he will have a hard time taking advantage of you.

NEVER DO ANYTHING ILLEGAL

Never, never, never do anything illegal, especially when you are trying to collect money from a customer. There are customers out there who will actually attempt to trick or goad you into doing something illegal just so that they can get away with not paying you. They are the criminals, not you. I know it can be tempting to take direct action instead of waiting and waiting and waiting for justice to be done, but DON’T DO ANYTHING ILLEGAL.

In the long run, you will be happy that you did not sink to the level the customer had sunk to. Revenge, destruction of property, and physical violence make for interesting books and movies but have no place in business.

In this world, there are people who take something and make it better, and there are people who find something and make it worse. Only one of these types of people will make a good contractor.

NEVER THREATEN TO DO ANYTHING ILLEGAL TO THE CUSTOMER

You might think that you can threaten a customer into paying you, and in some cases, you will be right. After trying every other method, if a customer still hasn’t paid you, he may, in fact, respond to being threatened by you. Just be very, very sure that what you threaten to do to the customer is legal. And be very, very, VERY sure that you never threaten to do anything illegal. One kind of threat can get you paid; the other can get you sued.

When every other attempt to collect money from a customer has gotten nowhere, it’s fine to tell a customer that you are going to take him to court to collect the money that he owes you. It’s quite another thing to threaten to harm him or his business in any illegal way. In a court of law, that’s called extortion.

If you find yourself at the point where you are about to threaten to do something illegal to the customer, remember that the customer will probably end up using this as an excuse not to pay you.

This advice does not apply to you if you are a loan shark, hit man, or someone in the protection racket; but, it generally does apply to anyone with a permanent address.

In contracting, if you are going to threaten a customer, first learn the law. Then, if you must threaten your customer, threaten him with the law. That way, if the customer still doesn’t pay you, you can follow through with your threat without having to worry about getting into legal trouble yourself.

GENERAL CONTRACTORS

Everything written in this chapter so far applies to all customers, from housewives to multi-million dollar corporations. This includes general contractors as well.

There are some additional things that you can do if you are faced with a collection problem with a general contractor. When I talk about general contractors, I am using the term loosely to mean any person or organization who hires you to do a job for one of their customers with the customer paying the general contractor and the general contractor paying you.

First of all, on any General Contractor work, you should put a preliminary notice on the job. I don’t have any idea how this works in your area of business, but learn how and do it. This will allow you to put a lien on the property you performed work on.

The way to collect money from a general contractor is pretty much the same as collecting from other customers with one very important exception. After a general contractor has broken several pay agreements with you and you are at the point where you are beginning to think that he is never going to pay you without some kind of legal pressure, you can go directly to the customer to let him know that the general contractor is not paying you.

Often, you will find that the customer has, in fact, already paid the general contractor for the work you have done, and so the customer had no idea that you had not been paid. The solution is to get the customer to pay you directly for your work and deduct the amount from what he still owes the general contractor. If you go to the customer soon enough, there is a good chance that he will still owe the general contractor some money, so don’t wait too long.

Another way to collect money that a general contractor owes you is to just file a claim against his bond if he has one. If he is a licensed contractor, he should be bonded for a certain amount of money. Often it will be enough to cover what you are owed.

WRITTEN CONTRACTS

There is a general legal principle that any contract between two or more people, whether verbal or written, is legally binding. But when it comes time to collect from a difficult customer, which would you like to be able to bring to court, the verbal contract or the written contract?

As I’ve stated before, PUT YOUR PAY AGREEMENT IN WRITING. I’m not going to beat this to death. It’s your decision. My personal rule is:

IF YOU CAN’T AFFORD TO LOOSE THE AMOUNT OF MONEY YOU HAVE SOLD A JOB FOR, GET A WRITTEN CONTRACT.

These are the basic things that a contract should have:

1. Whatever things that are required by the law to be on the contract.

2. The date.

3. The job location that the contract refers to.

4. A description of the work that you have agreed to do.

5. The amount of money that you are going to be paid for the work.

6. The exact time when you are to receive the money.

7. The customer’s signature and date that he signed the contract.

8. Your signature and date that you signed the contract.

There can be a lot more than this on a contract. The easiest way to get contracts is to simply buy already printed-up contracts and just fill in the blanks. You can also have custom contracts made up for you. If you do, talk to an attorney who specializes in contract law.

THE BEST COLLECTION TECHNIQUE OF ALL – AVOID CUSTOMERS WHO DON’T PAY

Here is a list of the kinds of customers who are likely to not keep their pay agreements with you. When you run into customers like this, you should do what every really successful businessman has learned to do — avoid them like the plague!

No customer is perfect, but the more a customer demonstrates any of these characteristics, the more likely that you are going to regret doing work for him. As a general rule, if you find yourself wondering whether or not you should trust a customer — you shouldn’t!

Trust your feelings about customers – they are almost always right. Here’s a list of customers to avoid:

CUSTOMERS WHO ARE NOT FRIENDLY

CUSTOMERS WHO ARE NOT COMPETENT

CUSTOMERS WHO DO NOT KEEP PAY AGREEMENTS

CUSTOMERS WHO ARE NOT EASY TO COMMUNICATE WITH

CUSTOMERS WHOM YOU DO NOT LIKE

CUSTOMERS WHO COMPLAIN ABOUT OTHER CONTRACTORS

CUSTOMERS WHO MAKE FUN OF OTHER CONTRACTORS

CUSTOMERS WHO ARE HARD TO WORK WITH

CUSTOMERS WHO SEEM TO HAVE LOTS OF PROBLEMS

CUSTOMERS WHO COMPLAIN ABOUT ANYTHING HAVING TO DO WITH MONEY

Do yourself a big, big favor and avoid customers like this. Really, it could make the difference between doing very well as a contractor and doing very badly as a contractor. If you can learn to recognize and avoid these potentially bad-paying customers before you get stuck doing work for them, you will have greatly increased your ability to succeed as a contractor.

COLLECTION TIPS

DON’T BE AFRAID THAT A CUSTOMER WILL GET MAD AT YOU

What I am about to say should not be used as an excuse to break any of the earlier rules of collecting. If you follow these rules when you are collecting money, you will already be polite and professional when you are dealing with a customer who owes you money. But, one of the things that you don’t have to worry about is that a customer will get mad at you when you are trying to collect your money from him.

The reason is this: any customer who gets mad at you when you are politely and professionally attempting to collect money from him is a customer that you never want to work for again. As a matter of fact, it would be a good idea for you to avoid doing any new work for a customer who has already demonstrated an inability to keep his pay agreements in the past.

When a customer owes you money, just do the steps of the CUSTOMER COLLECTION SYSTEM and if the customer gets mad at you for trying to collect money that he should have paid you already, don’t worry about it.

A customer like this will often “get mad” at you in an attempt to make you go away. As a matter of fact, the very fact of getting mad is an indication that you had better put even more pressure on the customer if you ever expect to collect your money.

THE LONGER IT TAKES FOR YOU TO FIND OUT IF IT’S THE TRUTH, THE MORE LIKELY IT’S A LIE

When a customer tells you a lie, he will, of course, try to prevent you from finding out that he has lied to you. The two most common ways that a lying customer uses to cover up a lie are:

A. Using TIME to hide his lie.

B. Using a GENERALITY to hide a lie.

If a customer didn’t have the money that he owed you, he would be unlikely to tell you to come right over and pick up his check. He would be much more likely to tell you that he would pay you in a week or so….

By telling you this, he not only has given himself more TIME to handle the fact that he doesn’t have enough money to pay you right now, he has arranged it so that you don’t have an exact time when he will pay you. He has given you a generality.

To you “a week or so” may mean around seven days. To a customer who has already broken a pay agreement with you “a week or so” will usually mean “one week, two weeks, three weeks, whatever….”

You can avoid this trap by insisting that the customer never get away with giving you a generality, but instead always gives you an exact statement as to what he intends to do. And remember, the further away in time a customer’s solution is, the less likely it is that the customer’s solution will turn out to result in your actually collecting.

SOMETIMES IT IS JUST EASIER TO EARN NEW MONEY THAN TO COLLECT OLD MONEY

There are times when you would be better off giving up on collecting from a really bad customer and just earning money from new jobs.

Sure the guy is scum. Sure it is completely unjust that an unethical customer can get away with stealing money from you. Unfortunately, even though this is true, there are times when the best way to handle a really awful customer is to simply get as far away from him as possible.

There are times when your continued connection to a really bad customer will end up causing even more damage than he has already caused you by not paying what he owes. If a customer owes you one thousand dollars and it will cost you three thousand dollars in time, effort, and emotional upset to collect the one thousand dollars, the best thing that you can do is just walk away.

You have the option of going on to bigger and better jobs. The really awful customer doesn’t have that option.

THE LONGER YOU CAN AFFORD TO WAIT FOR YOUR MONEY, THE EASIER YOU WILL EXPERIENCE THE COLLECTION PROCESS

After a customer has broken his original pay agreement with you, it usually takes you a lot longer to collect your money than the customer says it will. This is an annoying problem at any time, but if you really need the money, the fact that a customer isn’t paying you can turn into an extreme difficulty.

In many cases, customers who don’t pay you on time will pay you in about twice the amount of time that they originally agreed to pay you in. Whether you call them once or ten times, they will still pay in the same amount of time. This is not to say that it is O.K. that they don’t keep their original pay agreement, but it is nevertheless true that about half the customers who don’t pay you on time will pay you in about double the original time that they agreed to.

Just follow the CUSTOMER COLLECTION SYSTEM. With customers like this, you might get them to pay a little sooner if you really work on it, but it will take a lot of extra effort on your part. So, in about half of your collection cases, the easiest way to collect your money is to just wait for some time to go by and for the new agreed-to date to roll around. These kind of customers will pay you without any effort on your part.

With this in mind, it would be much easier for you to be able to simply wait for these customers to pay you on their own, rather than your having to use up a lot of your time and energy trying to get them to pay you a little earlier.

But can you wait? Do you have enough extra money to be able to afford to wait? If you don’t, then you will often find yourself doing a lot of worrying about money.

You can save yourself a lot of wasted time and heartache if you keep enough money on hand to cover your company expenses while you are waiting for customers of this kind to pay.

It would be simple if all you ever had to do was just wait a little longer to collect the money that customers owe you. Unfortunately, this will only work for half of the customers that owe you money. The other half will require more pressure from you, and if you simply wait for them to pay you, you may never see your money. So how do you decide which kind of customer you are dealing with? Will he pay on his own or will you need to put increasing amounts of pressure on him in order to get paid?

The way to find out what kind of customer you are dealing with is to use the CUSTOMER COLLECTION SYSTEM. Remember, it’s what they do not what they say. Just do the standard collection steps with all customers. If a customer breaks a second pay agreement with you, you will know that he is the kind of customer that will have to be kept on a short leash. Generally, the slow but relatively honest customers will not break a second pay agreement with you.

KEEP YOUR LEGAL OPTIONS OPEN

Sometimes, you will loose some legal right to collect the money that a customer owes you if you wait too long to exercise your legal rights. No matter what a customer tells you, NEVER GIVE UP ANY OF YOUR LEGAL RIGHTS TO COLLECT MONEY FROM A CUSTOMER.

Occasionally, you may run into a customer who deliberately attempts to get you to delay taking a legal action that will ensure your getting paid. His intention is to never pay you, no matter what he says.

Don’t fall into this trap. If he threatens that something bad will happen to you if you take legal action or the necessary steps to ensure your legal collection rights for the future, you will know that this customer is definitely not intending to pay you. In a case like this, you don’t need to worry about the customer getting mad, you do need to worry about your getting paid. So, no matter what the customer says, never give up your legal rights. KEEP YOUR LEGAL OPTIONS OPEN.

THE BEST WAY TO COLLECT MONEY IS TO AVOID CUSTOMERS WHO DON’T PAY YOU

Pretty obvious, right? Nevertheless, it is needs to be said. By the time you will have finished this book, you should be able to recognize most of the customers that you should avoid. But when you are looking for work, you may be tempted to disregard a bad sign about a customer simply because you need the work. Believe me, the last thing you need if you want to improve your business is a bad customer.

The rules about customers and collecting money from customers apply at all times. It doesn’t matter if you have a lot of work or you really need work. Don’t make the mistake of doing work for bad customers at any time. Losing money on a customer will never help you make a profit or build your business.

The way to handle needing more work is to get a lot of good customers. If you want your business to do well, you must learn to recognize bad customers and NOT DO WORK FOR THEM.