Collection agencies have a bad reputation, and unfortunately, it’s a bit of an earned one. I say unfortunately because there are some fantastic commercial collection agencies out there who act very professionally and provide their clients with a great service. A few bad apples have tainted the public’s perception of the ARM (accounts receivable management) industry as a whole, and this causes a little apprehension when a company is trying to decide whether to enlist the help of a collection agency.
If you do your homework and partner with a good agency, a professional collector can do wonders for your business. In the mechanics lien context, enlisting some collections help when you run into a payment dead end can be the difference between getting the lien claim paid and not.
What A Collection Agency Can Do That You Can’t
Every business is a niche business in some sense of the term. If you’re a painter, you know painting. When a general contractor proposes to self-perform the work because it’s “easy,” or when a homeowner figures they will just do the painting themselves, it makes your blood boil. You know you can do a better job and that your service has value. You live it everyday.
Sometimes, we forget to see things in the same way when thinking about other services. Every service comes with a cost, but since the vendor you select focuses on that particular service, there is value in what they do simply because they know how to do it so well. That is the first point I want to make about why a collection agency can be great for your company.
Sure, you can make phone calls and send letters in-house, but you can’t do it the same way a collection agency will because the collection agency has irreplaceable experience in collecting accounts and has the ability to focus on providing this service to your account (your focus, remember, is on providing your particular service).
Here are some other things a collection agency can do that you can’t:
- Send letters and make phone calls as a collection agency, which alerts your debtor that you have escalated the debt;
- Be independent and distant from you – the creditor – which means a little more leverage in negotiating the debt payment;
- Report debts to credit reporting offices;
- Get Skip-Tracing reports on debtors and conduct other debtor research;
How To Collect On A Mechanics Lien
This is a funnel I put together that visually demonstrates how your mechanics lien claim will likely be resolved. This funnel does not contemplate claims that are filed without lien rights, which would need to be removed.
In the past, I’ve blogged about how effective a mechanics lien can be by just having it filed. As shown in Zlien’s survey of 2011 mechanics lien filings, for example, over 64% of lien claims are paid within 3 months of filing without any additional collection or legal work needed.
Take a look also at the funnel graphic to the left. This also shows the 64% of mechanic lien claims that are paid immediately and without further legal work, but right below that in the funnel you see that some claims are resolved when additional collection action is performed. This part of the blog post is focusing on that additional collection effort. Here are some pointers.
Consider Using A Company (Zlien) To Help You Collect
The beginning of this post made the case for hiring a collections agency to help you collect a debt like a mechanics lien claim, and I’ll reiterate it here. If you’re at a deadend trying to collect on your mechanics lien claim, get someone to help you collect it. This will escalate the debt in the mind of the debtors, and a few new tricks can be tried to get the debt paid that were not available to you.
It’s a good idea to get a debt collector who understands construction debts and mechanics lien claims specifically. Mechanics lien claims are a special breed of debts and there are a number of advantages these claims provide your company…if they are properly understood.
Get a debt collector who understands the mechanics lien process. Zlien, obviously, understands the mechanics lien process, and that’s why we’re a great choice to help you collect on your mechanics lien claim. (Zlien, by the way, is not a collection agency. We work with Miller, Ross & Goldman for this).
Get In Touch With All Of The Parties
One of the primary benefits of the mechanics lien filing is that you get a lot of parties involved, including the property owner and the prime contractor. Depending on the state law application, the lender’s interest in the property may also be effected. If you’re sitting on a mechanics lien claim, you substantially increase your chances to collect the debt if you reach out to all the parties, educate them about your debt and make sure they understand that they may be legally liable if further pursuit is required.
Provide Backup – Lots of Backup
When you’re faced with a construction claim for payment, backup is important. This means you must get your ducks in a row by putting together all contracts, change orders, invoices, emails, purchase orders, delivery receipts, etc. The better your documents are, the more likely you are to close the deal and get the claim paid before litigation. Further, while you may not realize it, just having your documents in order will make it easier to get the other parties to accept your debt and pay it.
About Scott Wolfe Jr
Scott Wolfe Jr. is the CEO of Zlien, a company that provides software and services to help building material supply and construction companies reduce their credit risk and default receivables through the management of mechanics lien and bond claim compliance. He is also the founding author of the Lien Blog, a leading online publication about liens, security instruments and getting paid on every account. Scott is a licensed attorney in six states with extensive experience in corporate credit management and collections law, with a specific emphasis on utilizing mechanic liens, UCC filings and other security instruments to protect and manage receivables. You can connect with him via
Twitter, LinkedIn and
Google+.Read Scott's Biography Post Here
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