Collecting Invoices from Problematic Clients
Chasing unpaid invoices…
Recently, I have been receiving numerous emails and phone calls from appraisers asking if they can factor appraisal orders from JVI Solutions with our company. Appraisers from Hawaii and California to Texas and New Jersey have grown tired of the runaround and are looking for ways to get paid on the work they have done. Unfortunately, because of non-payments and the unknown status of the Florida-based appraisal management company, whether a larger Fortune 500 company is acquiring it or going bankrupt, our company has currently placed a hold on factoring any JVI Solutions orders until we receive further details on the immediate direction of the company.
So what does this mean for appraisers left with unpaid work? Many are seeking alternative avenues to recover at least part if not all of their money. In order to protect your business and yourself from future problematic clients, you must understand two things: 1) there are usual signs, typically excuses, that lead to a company being in serious financial trouble and 2) know your collection options to attempt to collect a debt.
10 Common Excuses not to Pay
When companies begin to have cash flow issues they may start resorting to “every trick in the book” to delay the payment of invoices. The sooner you catch these tricks the least likely the account will lead to collections. Here are 10 excuses that you are most likely to hear (or already heard) from clients when chasing unpaid invoices and suggestions on how to respond.
- CLIENT: “The check is in the mail.”
YOU: “What is the check number and when it was paid?”
- CLIENT: “We are not paying, there is a dispute.”
YOU: “How can I help fix the problem?”
- CLIENT: “We can’t afford to pay you until my customers pay us.”
YOU: “I am willing to take a partial payment now and the balance later. How much can you pay now?”
- CLIENT: “Our system is down.”
YOU: “I can take a credit card payment. What is the credit card number and expiration date?”
- CLIENT: “You are next on our list to pay.”
YOU: “May I remind you that your payment is past due therefore I will need the payment today!”
- CLIENT: “We cannot pay right now as we are in a middle of an audit.”
YOU: “May I remind you that auditors only check historical financial information relating to your business. This means an audit does not affect your ability to make a payment today.”
- CLIENT: “We are insolvent or filing for bankruptcy.”
YOU: “What is the name of the firm dealing with this manner as this is an attempt to collect a debt?”
- CLIENT: “We have changed ownership.”
YOU: “Who is the new owner? I would like to get his contact information.”
- CLIENT: “The authorized signer is not in the office.”
YOU: “Payment doesn’t have to be a check. I can take an electronic payment or credit card.”
- CLIENT: “We are in the process of changing banks.”
YOU: “When is your company making this transition? I can take a payment now by credit card also.”
Of course there are several ways to answer or respond to each excuse, but it is very important when asking a question that it is in an open-ended format. This allows you to get a full and meaningful answer from your client. A simple yes or no answer will not allow you to dig deeper to find the solution to your problem. Here is another list of excuses and responses that you may find helpful.
What are my Collection Options?
Since factoring is not an option with this particular appraisal management company, appraisers have asked me what other options they have to collect on unpaid invoices. May I suggest the following collection options.
Your Collection Process – Every appraisal business should have its own collection process. If you do not have a structured collection process – create one! Anyone can pick up a phone and ask to get paid, but if you do not have an efficient and effective collection process your cash flow will struggle. Having a well-defined set of collection steps to follow consistently (from the first contact with a client through the final payment) will allow you to be successful in getting paid quickly.
Does Your State Have An AMC Bill? – If your state has an AMC bill in place educate yourself on its collection procedure. In Texas for example, H.B. No.1146 states that appraisal management companies must pay an appraiser for the completion of an appraisal assignment no later than the 60th day after the date of submission of a completed appraisal. If an AMC does not pay within the allotted time the Texas AMC bill contains a dispute resolution section explaining how an appraiser can file a complaint with the state appraisal board against the debtor if payment issues remain unresolved. Furthermore, if the debt is still not satisfied, the board may reprimand the AMC suspending or revoking registration or even an administrative penalty of up to $10,000 for each violation. Understanding your state’s AMC bill can increase your chances of collecting on unpaid invoices.
Approach Lender Client – In some cases, it is worth communicating with the lender client regarding non-payments by an AMC. For instance, after AppraiserLoft went out of business, MetLife Bank took the initiative to reimburse appraisers on unpaid invoices. Even if the lender client does not compensate you for the completed appraisal assignment, this approach can at least spark a fire in the collection process.
Third Party Collection Agency – Send a certified letter to your client stating you are attempting to collect a debt and the lack of response will result to their account information being submitted to a third party company such as a collection agency or an attorney. If you choose to use a collection agency you have the option of using a local or national collection agency. You may also look into submitting the account information to the major credit bureaus.
Take Legal Action – Other than utilizing a collection agency your last chance to collect on unpaid invoices may be filing a small claims with your local court jurisdiction specifically wherever the property appraised is located. If you win you may be able to file a lien against the AMC until payment is made. See your local court jurisdiction for procedures or guidelines.
Do you have any collection success stories you would like to share with your fellow appraisers? If yes, feel free to comment below. Please remember to be kind and respectful when posting comments. Thank you!