Getting paid at the end of a job can be one of the biggest challenges restorers face. Restorers should recognize that collecting money has very little to do with their invoicing process once work is finished. Rather, collecting starts from the moment they first make contact with a prospective client. A happy client is much more likely to pay than an unhappy client, so the steps taken early on and throughout the job are extremely important. Setting realistic expectations, communicating effectively, and thoroughly documenting the work, will have a huge impact on a restorer’s ability to get paid once the work is completed.
There are two very common reasons why restorers have difficulty collecting what they’re owed at the end of a project. First, restorers often must overcome challenges to scope and pricing from desk adjusters and third-party consultants who have rarely set foot on the project site, and who often have limited real-world experience with mitigating or repairing property damage. Second, restorers often encounter property owners who, for a myriad of reasons, refuse to pay once work is completed. While there are strategies and techniques for dealing with these situations after they arise, the most effective strategy to ensure timely payment is to set jobs up for collections success from the first moment contact is made with a potential new client.
Most restorers understand that starting with a well-written, current contract is essential, not only for when payment disputes arise, but also to protect against potential liabilities that could arise during the course of work. There are also other steps restorers can take to maximize recovery on projects and minimize liabilities.
Setting Realistic Expectations is Crucial
When a restorer first makes contact with a prospective client, the client is probably going to be in a delicate state of mind. They’ve just suffered a loss to their property, they may be forced to move out of their home, their personal possessions may have been destroyed, and they’re scared and confused. They will look to the restorer, as someone who helps people in these situations daily, to ease their fears and assure them that it’s all going to be okay.
While it is very important to treat the owners kindly and with empathy, it is also crucial to use this opportunity to set realistic expectations. Restorers should not tell property owners they’re going to fix the home to “better than it was before.” Restorers should not tell property owners they will have the owners back in the home “in no time.” Restorers should explain in general terms what the process will be but wait until they have done an adequate assessment before making any representations to the owner regarding the scope, timing, or cost of repairs.
Documentation Should Tell a Story
If a project is properly documented, a third-party should be able to look through the photos, drying logs, moisture maps, and reports, and have a very good idea of what happened on that job. Photos should be taken before, during, and after work, date stamped, and taken from close-up so the damage is clear, but also at a wide angle, so the placement of that damage within the room is shown. Thorough documentation is particularly useful for a desk adjuster, who is going to compare the documentation to the invoice to make sure all the charges included in the invoice are justified. The clearer the picture the documentation paints, the less likely the adjuster will be able to find charges to legitimately challenge.
Restorers should take particular care to document any unusual challenges or unexpected conditions that arise, such as non-standard installations in pre-existing construction, subsequent storm water or sewer back-ups after an initial event, or obstacles impacting efficient job production. Adjusters have a hard time approving charges that are not “customary,” so when an invoice is submitted, the restorer must be prepared to fully support charges related to the unusual challenges or unexpected conditions that arose.
Signed change orders are required for any changes to the scope, pricing, materials, completion deadline, or any other material contract term. Upon completion of the work, restorers should ask the owner to sign a Certificate of Satisfaction, verifying that all the contracted work was completed to the owner’s complete satisfaction. Once the Certificate of Satisfaction is signed, it’s very difficult for the owner to challenge the workmanship or seek setoffs.
Professional and Clear Communication Prevents Problems
Effective and clear communication with all key stakeholders in a loss is one of the best ways to prevent issues with collecting money down the line. At the start of every job, the restorer should identify the key stakeholders, and use regular and systematic communications to keep all stakeholders continually advised on project progress, challenges, and developments. Regular updates to the stakeholders should include information on the status of the project, next steps, deliverables needed from the other parties in order to stay on track, projected completion date, and the current status of the project financials.
By continually reminding stakeholders of the progress made on their project, plus what is needed from them to keep progress on track (including timely delivery of payments) restorers will eliminate many of the obstacles to payment that commonly arise. Additionally, when payment disputes do arise, they will be in a much better position to establish their right to payment.
Please remember that communications must be kept professional at all times. It can be very frustrating dealing with emotional owners and adjusters who seem unreasonable; however, losing your cool is never helpful. In the event a payment dispute rises to the level of litigation, a restorer may be required to produce its email correspondence to other parties. Assume every email written could end up in front of a jury; if the restorer comes off as a hothead, the jury will think they are a jerk. If the jury thinks the restorer is a jerk, they will probably lose the case, even if the facts and law are on their side.
When Things Go Wrong
Occasionally, even on jobs where the restorer does everything right, they still have issues getting paid. In these instances, there are a few tricks and tools restorers can use to help maximize their chances of recovering.
One of the most effective tools a restorer can use when a client is not paying is a mechanics lien. Recording a mechanics lien against a property will impact the owner’s ability to sell, refinance, or access equity in a property, and provides a means to force the sale of the property to satisfy amounts owed for improvements made by the restorer to the property. The requirements under mechanics lien statutes vary widely from state to state, so restorers should consult an attorney regarding lien requirements in each state where they operate and develop a system for tracking lien deadlines on their projects.
To manage delinquent receivables, consistency is key. Don’t disappear from the customer’s awareness. Start cordially, and then escalate efforts gradually and systematically through a combination of phone calls, text messages, emails, and formal letters at regular, periodic intervals, starting when the debt is seven days delinquent, and gradually escalating follow-ups at 14, 30, 45, and 60 days.
Once the restorer has exhausted all these steps, if the client still has not paid, then it’s time to explore legal remedies. The contract should set forth a due date for payment, and the fact that the customer did not pay means they breached the contract. This breach starts the clock on the statutory deadlines to take action against the customer. In the event a lawsuit becomes necessary, it must be filed before the statute of limitations expires. Calculating deadlines requires legal training and must be done by a professional, so a restorer should contact an attorney no later than 75 days after completion of the work to learn their deadlines.
Angela Bajramaj, Esq. is a licensed Michigan attorney and a Partner at Law Offices of Edward H. Cross, and a consultant with Restoration CrossCheck, LLC. She is former Corporate Counsel to BELFOR, where she oversaw the company’s U.S. collections. She is also a licensed general contractor. Angela can be reached at AngelaBajamaj@EdCross.com or (313) 879-4040.
