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8 Essential Tactics for Collecting Unpaid Construction Invoices
Making payments easy, prioritizing accounts, keeping detailed records and others can save your business the headache of customer debts.
2 Min Read
Olivier Le Moal/Alamy Stock Photo
Construction company owners with unpaid customer invoices face impeded cash flow, difficulties with operations and profitability problems across all areas of the business. But there are easy, inexpensive tactics contractors can use to get paid faster.
“When a client takes longer to pay than the agreed upon time, it destabilizes your cash flow and makes it harder for you to pay your (business) expenses,” said debt collection expert Salvatore Cimino during a recent webinar for the National Roofing Contractors Association.
“The best defense in collections is a good offense, and that begins with using tools available to you to resolve accounts receivable issues before they start,” said Robert Andreu, Cimino’s colleague and co-presenter with more than 35 years’ experience in debt collections.
When developing an effective collections strategy for your construction business, Cimino said the benefits of a structured approach include a stable cash flow, improved efficiency and success rates and easier payment processes for customers. Regular evaluation of the strategy is also needed to maintain effectiveness and encourage adaptation to changing circumstances.
Here are eight key tactics from Andreu and Cimino for maximizing on the collection of unpaid invoices:
Prevent bad debts. Check customers’ credit before transactions. It’s always good to know and understand who you’re doing business with, and such knowledge can prevent issues, said Andreu.
Prioritize accounts. Identify the oldest accounts and overdue amounts. Someone that owes you $150 should be prioritized lower than someone who owes you $1,500, according to Andreu.
Make payments easy. Clearly define payment methods and terms and provide multiple payment options. A customer should always receive an invoice that contains an itemized list of what’s due, the payment due date, the consequences of late payments and the available methods of payment (cash, check, money orders or others).
Notice early warning signs. Common red flags include no returned calls, lack of email responses, broken promises and small payments.
Keep detailed records. Track your collection attempts, including who you’ve spoken with and what was discussed. Also, utilize electronic payment reminders, past-due notices, final notices, direct contact and other appropriate methods of contact.
Build custom plans for late clients. Create personalized payment plans and extend the payment terms if necessary and appropriate.
Be empathetic but professional. Maintain professional communication throughout and focus on finding solutions. Communicating with the customer and working together to find a solution are often more effective than threats and hostility, according to Andreu.
Know when to hire a professional debt collector. For some accounts, the above strategies will not work. For outstanding debts older than 90 to 120 days, consider outsourcing to collection agencies to ensure legal compliance.
Keep an eye out for part two of this webinar, which focuses on effective communication techniques when collecting unpaid debts.
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