Avoiding Collection Nightmares: An Attorney’s Best Practice Tips
It’s a tale as old as time. A customer’s home has suffered a disaster that needs immediate attention. Your team arrives quickly and diligently works to make the home good as new. The customer is ecstatic with the work . . . until the invoice arrives. The insurer claims the invoice is excessive and tries to cut costs that were essential to proper performance of the work. The customer claims it was blindsided by the charges. Unfortunately, unless you are willing to forego profit, or even take a loss on the project, these cases often result in litigation. However, there are simple practices you can implement in your business that can help avoid litigation or at least simplify and expedite the process.
No Blurry Contracts
Many companies utilize service contracts that come from generic online templates. Because these templates are not tailored to your company, the contract terms can be unclear and open to multiple interpretations. Everyone involved is left to speculate what the words could and should mean. Using clear and direct language can solve issues of interpretation.
Make sure that the contract clearly states that it is your team and your team alone that will determine the methods and equipment that are necessary to remediate and restore the property. There is no formula or guideline that can replace the onsite analysis that your team of trained professionals can perform. Each project comes with its own unique circumstances and challenges. The customer should acknowledge that in signing your contract.
Clearly identify your pricing method. If your company has its own price list, reference that price list and attach an updated copy to the contract, if possible. If your company uses Xactimate’s base pricing, specify that you will be using pricing of a date certain (i.e. date of first, date of last work, date of invoice, etc.). If you charge for profit and overhead, state that profit and overhead will be charged at an identified percentage. Your customer should never be able to argue that it was not given notice of what you charge for your services.
Include a clause that states that there were no guarantees or promises made that were not explicitly written into the contract itself. Integration clauses can avoid prolonged wars of “he said, she said” and will protect you if an employee makes statements that go against the contract.
A provision stating that your company is entitled to recover all costs and attorney fees incurred in attempting to collect on overdue invoices is important. It’s best to make this provision one-sided in favor of your company. Cost shifting provisions are reciprocal in most states, but this may reduce your exposure in a minority of states.
Don’t Start Work Before You Have a Signed Contract
This may seem obvious, but when you are quickly trying to evaluate the needs of the project, mobilizing crews and equipment, and communicating with the customer and its insurer, getting the contract signed can get lost in the shuffle. Your onsite supervisors need to develop good habits of getting that signed contract in hand before dispatching crews or equipment to the site. Include a space on your project logs to mark whether there is record on file of signed contract. This should alert your team on a daily basis that they need to go get a signed contract.
Proof IS the Pudding
Disgruntled customers and adjusters are quick to try and accuse your company of billing for work that was never performed. Detailed equipment, labor and drying logs are important. Document each piece of equipment used on the job by identification number, date and time placed, rooms used in, and date and time the equipment was retrieved. Show your work. Take photos before, during and after the project that support the information in your logs. If you gather moisture readings or data, take a photo of the instrument you used. You should also consider having clients sign off on daily logs where possible.
What You Say Can and Will Be Used Against You
Good advice even when you are not under arrest. It is not uncommon to deal with customers who are willing to make matters hostile. We are all human and it can be easy to fire back in kind. This becomes somewhat problematic when litigation starts as the other side will use your responsive communications to paint you as unprofessional and aggressive, regardless of who started it. While it is important to defend the integrity of your company, resist the urge to sling mud. When you see that the customer is starting to cross that line, cease any back and forth communications. It is unlikely the situation will get better without intervention. Attorneys are happy to step in and be the bad guy and can generally defend their clients without letting emotions control the tone of communications.
The general advice in this article can help, but it cannot solve every issue. It is always advisable to have an attorney who is familiar with your company and the industry review your contracts to identify areas of concern.