In a quick-paced world, getting paid promptly is key to many construction businesses. In order to do so, preemptive actions on the front end of your relationships with contractors and general managers is best. Here are a few quick tips to help you get out in front of the curve towards successful collections.
1. Initially, get as much information as possible.
Whether it means a credit application or a signed contract, knowing specifically with whom you are dealing will save a lot of headaches later. Is it an LLC that’s licensed to do business in the state where you are working? Is it a sole proprietor? Verifying this information using public sources and information from the party itself is key. Researching the company or individual also helps you more fully understand the possible scope of the source of repayment.
2. If you are able, get personal guaranties.
Having more than one source for collection, whether it be another corporation or individuals, helps increase your odds of collection later.
3. Get as much security as possible.
Take security interests in vehicles, equipment, intellectual property and/or accounts receivable. Get a mortgage on any real property owned by the company. Also, make sure you are perfecting these interests by getting security agreements, filing proper financing statements or mortgages, and keeping the filings current.
4. Repayment Schedules
If you run into issues early on with collection, consider a forbearance agreement where the parties agree in writing to a repayment schedule. Then work on holding the debtor to that plan of action, or to taking legal action on the forbearance agreement if it fails to do so.
5. Do not hesitate to involve a legal professional.
Oftentimes, headaches can be saved by involving lawyers early on in the collection process to let the other side understand the seriousness of the situation.
Whatever you do, make sure you take prompt and early action if you suspect payment for your services may become an issue. It is better to address these issues head-on than to hide your head in the sand and hope they will resolve themselves.