Reminder stickers. Wrap-around agreements. Extra-early lien notices. Complaints to licensing boards. Even a round of golf. Building material dealers nationwide employ a wide variety of techniques to make certain they get paid, notwihstanding today's housing slump. ProSales spoke with a number of dealers who shared their favorite techniques for collecting funds from customers who were overly slow to pay. What we found are dealers who have preventive systems in place that help avoid going to collection, often by sending a strong, consistent message to customers: Pay up, or there will be trouble for you and your business down the road.
Here are several examples of how dealers and industry experts across the nation cope with deadbeat customers.
Arleen Mantel and Tom Zuern
Credit Manager and Sales Manager
Zuern Building Products, Allenton, Wis.
Zuern has been putting lien laws with teeth to work in the Badger State.
Beginning with its first delivery to a job site, Zuern implements a construction lien notice, or subcontractor identification notice, notifying the customer, or the end-user, that the dealer is delivering materials. It also informs the homeowner that Zuern will be requiring payment for the materials in order to provide a lien waiver.
"It makes the homeowner aware that Zuern is going to be involved in the process," says Arleen Mantel, company controller and credit manager. "And we are going to be requiring the money."
The notice is also a warning to the builder that Zuern expects to be paid specifically for the materials it has delivered and the funds should not go astray. Essentially, funds paid to the builder and designated to Zuern should be paid to the dealer, keeping the builder on track in the process.
"This has been a valuable tool for our company," Mantel says. "It really puts the pressure on the builder to use the funds specifically from that job to pay us."
"There's been a lot of robbing Peter to pay Paul going on," Mantel notes. "This pretty much stops some of that."
When funds are not paid to Zuern, the dealer enters into discussion with the builder. If funds are not paid within a 90-day period following the delivery, Zuern files an "intent to file lien" notice, and the customer has 30 days to clean up the bill.
"It gets people a little frantic when they see the word 'lien,'" Mantel says.
Since implementing the policy, 80% of customers who received an "intent to file lien" notice have paid the debt within 30 days of receiving the notice, Mantel says, with another 20% going to an actual lien.
Tom Zuern, the sales manager, estimates the company has put more hours into catching up with collections "than one would want to."
But the lien technique brings contractors and builders to the table to discuss financial matters once they receive a lien notice. "If not for the lien, they could care less," Zuern says.
For one thing, the house can't move forward or be sold until the lien is actually cleared up. At the same time, the lien is bad publicity for the contractor and brings into question how he is running his business.
"When it's not unavoidable, and it's a last resort, it has proven to be a valuable technique," says Zuern, noting that the company's history when it comes to collecting judgments has not been stellar.
"It's one of the few security practices you can have when sales are not what they were a few years ago," he adds.
Zuern Building Products recently held a builder breakfast at a local Cabela's to help educate builders about the lien technique and lien laws. The event drew more than 100 builders as an attorney walked them through the lien law process from start to finish. Builders were also given a lesson on how they can protect themselves from the lien law.
"Everyone that came away from that event was impressed by what the attorney put forth," Zuern says. "Our builders felt much more comfortable with what measures they should be taking."
But the attorney also works for Zuern and has trained the dealer on how to fill out its own paperwork for claims of $5,000 or better that ultimately are fought out in court.
"Our attorney works very closely with us and he has helped us understand a lot of paperwork for filing a large claim," Mantel says. "We prepare a lot of the work to help save some of the cost." However, the paperwork for claims is finalized by the attorney.