By Chris Lude, Co-Owner of Denver Concierge.
Our most notable bad debt losses have always resulted from our own lapses of judgment.
On a day with some slack in our schedule, a realtor calls up and asks us to clean an empty house in a rush for an open house she is doing tomorrow. We ask who will pay, and she says, “Send me a bill for whatever the charges.” All the signs were there; anyone taking notice needn’t have waited three months for our final collection letter being returned undelivered to have recognized this as being indefensibly uncollectible. Of course we knew better, but we had some slack in the schedule and we filled it–another bad debt, and nothing to do in this instance except blame ourselves.
Our number of transactions has grown over the past four years from about 40 per week to over 250 per week and over the same period, our bad debts have actually decreased by over 75%. In fact, we have reduced our bad debts to almost zero by employing a few basic rules and procedures:
- We don’t accept nonrecurring work without advance payment. Our experience shows that a nonrecurring assignment is over twenty times more likely to result in a bad debt than a recurring assignment. If the job is going to be done on an hourly basis, then we get a credit card and charge at least a portion of the amount in advance.
- Rascals like to skip paying for their final house cleaning, and with collections, time elapsed is never an ally. So, we accelerate collection efforts for final cleanings, and any nonrecurring service. We send a first collection notice the day following service, the second notice four days following service, the third notice ten days following service, and in this way are prepared to undertake collection procedures for non-payment of any type of nonrecurring work after just two-weeks.
- We never knowingly service a leased property on any basis other than credit card payment, and we always require full advance payment with a faxed request for service when dealing with any type of agent or property manager. And we never allow an agent or property manager to book service for which they have not personally committed in writing to pay.
- If realtors act rascally we report them to their board of realtors.
- If a customer forgets to leave a check three times in a calendar year, then we convert them to a credit card customer.
- For all recurring customers forgetting to leave a check or paying with NSF checks and maxed out credit cards, we generally continue service, as long as the customer continues to return our phone calls, but discontinue service immediately, if they fail to return even one phone call.
- We have had bad luck with collection agencies, and we don’t allow any balance to become large enough to warrant the costs of using an attorney. The day we finally decided to become serious about managing collections is the day we quit being wimps and started making our own collection calls. We have way more leeway than the agencies in what we can say and do to collect balances. For one thing, from an agency’s viewpoint, house cleaning bad debts are seldom very attractive in amounts, relative to agency’s other types of work, and they have always put our collection for even $300 on the back of their call cue. Secondly, customers easily put agencies off the collection trail by making claims they could not make to us directly. Thirdly, when we are managing collections properly, then we don’t represent a recurring customer for an agency, and agents treat us accordingly. Finally, we found that collection agencies like to collect the easy amounts and not bother with any others.
- We are methodical about sending out collection letters, and making and documenting collection calls. We give every customer the benefit of the doubt along the way, but document both sides of every phone call and all other aspects of the process just in case.
- Finally, for any unsettled amounts which are not disputed for poor service, we have a sheriff subpoena them to small claims court. This process is easy, and we never cease to be amazed at the response we get by sending a sheriff to someone’s workplace, or home. The clients almost always call and pay the very same day. About one in ten such customers don’t pay and instead meet us in small claims court. It is time-consuming to go to court, but we have never lost even one such case. The judges have always, without exception, been incredibly scathing to anyone who has had the audacity to show up in court having had their toilets cleaned, but choosing not to pay for it.
We did have one client against whom we prevailed in court and even still failed to collect. He didn’t mind arranging for us to clean his house, even though he knew he couldn’t afford to pay us. He filed for bankruptcy. With collections, don’t expect to win them all.