Get Creative
Dealers don’t want to seize and own a customer’s property any more than they want to be his bank, but sometimes it’s the only way to get paid. Recently, Porter “acquired” a fourplex in lieu of a cash payment to settle an account, which he now rents out because he can’t sell it for the value he needs to balance the books. “It’s a nightmare being a landlord,” Porter says.
Still, when tried and true collections methods don’t work, dealers get creative. Porter, for instance, has in the past negotiated to be a second mortgage holder on a property, upon which he pays off the entire loan and looks to sell the asset to recoup all or some of a delinquent bill. Other dealers have seized similar assets, from ATVs and boats to getting named on life insurance policies. “It’s that or get nothing,” he says.
Porter also makes his salespeople responsible, or at least feel the pinch of a late paying pro, by tying their 4% sales commission to when and whether the customer satisfies an account. “The rate drops off 1% for every month there’s an outstanding balance,” he says. If the bill gets paid within terms, the salesperson gets the full 4%. “If there’s any amount that’s 120 days outstanding, he gets nothing.”
Similarly, LBM supply chain guru John Culbert, vice president of credit management for Ferguson, advocates requiring credit managers to justify allowing customers in the 60-days-late column to purchase more material, for cash or credit. Richardson-Newton implores dealers to use their salespeople to verify the use of shipped materials on the job for which they were ordered ? and report abuses.
For truly lost accounts (and customers), credit experts suggest sending them and the IRS a Form 1099 reflecting the value of the goods shipped, which forces the recipient to report that amount as income and pay taxes on it. It may not get you paid, but at least you get some measure of retribution.
–Rich Binsacca is a contributing editor to ProSales.
Collect Calls
Have your A/Rsgone AWOL? Need new ways to get paid on time? Here are four ideas that dealers have adopted with some success:
- Tie sales commissions to on-time and late payments.
- Know your lien rights and exercise them vigorously.
- Create a New Project Worksheet for every new order that is applying for or leveraging credit from the lumberyard.
- Hire a trade credit service to manage your credit accounts.
