By and large, Darrell Gehrig’s clients pay promptly for his services. If they don’t, he stops servicing their pools. Simple as that.
Gehrig has a near-zero tolerance policy when it comes to losing money. When he installs equipment, homeowners pay him on the spot. He doesn’t waste time pursuing overdue payments. Small claims court? Not his style.
“If I wrote off $200 this year, that would be a high amount,” says the owner of Best Pools, which has about 400 accounts in the Scottsdale/Phoenix market.
Some service technicians, however, aren’t as stringent and that’s how they find themselves in hot water. Chasing after unpaid invoices is tiresome and potentially costly. Collection agencies can take anywhere from 10 to 50 percent of what you’re owed. And there is no guarantee you’ll win in court.
So, what’s a tech to do?
In the case of ongoing maintenance, the solution is pretty straight forward: Stop providing service until clients pay up. For some pool pros, that’s a difficult choice to make.
“It hurts the guys because they think they’re losing something, but if you’ve got a nonpaying client, the only thing you’re losing … is your time, your materials and your supplies,” says Ray Arouesty, president of Arrow Insurance, which is based in a suburb of Los Angeles. The firm provides coverage for members of the Independent Pool & Spa Service Association.
Arouesty routinely consults with pool professionals who’ve let their customers fall three or four months behind, continuing to service the accounts under the assumption that they’ll eventually catch up. That’s an unlikely scenario. A client who can’t pay $100 for the first month, most likely won’t be able to pay $400 in four months.
Pay up front
That’s why David Hawes advises pool techs to bill in advance. Give clients until the 20th to pay for next month’s services, and if they don’t issue a check by the end of the month, drop them. “The smart thing to do is front-load all of those processes, so you minimize not getting paid on the backend,” says Hawes, owner of H&H Pool Services in the San Francisco area.
New clients might be hesitant to enter into that sort of arrangement, perhaps because they’ve been burned by a pool pro in the past, Hawes says. But that can be overcome with a clear, written agreement detailing the terms and conditions of service.
Gregg Simon plans to transition to an advanced billing cycle to keep customers current. Presently, he charges 30 days in arrears. The owner of Pollywog Pool & Spa Service and Repair, serving the Sacramento area, estimates dues-dodging clients cost him about $3,000 a year. “Every month we have a list of 12 people who owe us money,” Simon says. “It is frustrating.” Some come up with pretty creative ways not to pay. He recalls when one client told him he’d write him a check just as soon as he came back from an errand. Of course, the client never came back. Bounced checks are another occasional nuisance.
And there are those who claim bankruptcy, which brings its own challenges. Simon may have to travel out of town for the hearing — taking time off work and incurring expenses along the way.
Simon charges a small fee for late payments, which helps motivate most people to pay on time. For those who go beyond 60 days, he’ll threaten collections. But when things escalate to that point, it’s likely he’ll have to take the client to small claims court.
And that’s when a pool service technician is going to have to do some “serious soul searching,” as Arouesty puts it. Prior to appearing before a judge, think long and hard on this question: What is your customer’s best defense against your attempt to collect? In a counterclaim, a defendant could charge that the service provider’s work was inadequate, or that damage was done to the property.
These situations typically arise from a remodel or installation of new equipment — and they don’t always end well for the service technician. Imagine taking a customer to court over a payment owed on a new pool pump. The defendant counters that the pump was oversized, stripping the copper off the pipes, leaving copper deposits around the return lines. Not only does the customer refuse to pay you $500, but now the homeowner is suing you for $5,000 to pay for a new plaster job. To make matters worse, an expert witness — your competitor who was hired to fix your mistake — testifies that you did a crummy job.
“That’s where guys get into trouble,” Arouesty says. “They are nearsighted. They’re myopic in thinking that there is no other argument to the case.”
And woe to the unlicensed contractor who wants to settle in court. You won’t see a dime. At least that’s the case in California. Under the state’s Business and Professions Code 7031, contractors without the proper license cannot sue for compensation.
But provided you followed all the state and local safety codes, and have the documentation to back up your work, small claims court is an option, though it’s best to resolve these things outside of court.
Kurt Schuster, owner of Badger Pool Services in Phoenix, has found that, sometimes, all he needs to do is demonstrate that he means business to settle matters before the gavel drops. One client paid promptly after being served a judicial summons. Then there was the client who coughed up the money while Schuster and the debtor were in a conference room waiting to appear before a judge. “It is a pain,” Schuster says. “You have to file paperwork. You have to send them a certified letter,” and in some cases, hire a server to deliver the notice. But, he says it can be an effective last-ditch effort to get what you’re owed.
Lien on ’em
Depending on the situation, placing a lien on a client’s property could be another option worth exploring. However, the process can be complicated, and requirements vary state to state. That said, here’s a general overview:
A contractor who hasn’t been paid for any property improvements can file a lien — essentially a hold on one’s property. It’s a good way to create a jam between your client and his or her mortgage company.
“It creates tremendous leverage,” says Scott Douglass, a partner at the San Francisco-based law firm Farella Braun + Martel.
Generally, you have within 90 days of the job to file the lien in the courthouse of the county where the work was performed. The lien is good for 90 days, during which you have to file a foreclosure action in order to collect on the payment, at which point you may want to consult with a lawyer. “You have to be pretty savvy about this stuff if you’re going to go down that path,” Douglass advises. So, there better be a lot of money on the line to make it worth your while.
However, to simply record the lien doesn’t require any expensive legal expertise — and that just might be enough to get your client’s attention.
Ira Worsham, owner of Crystal Clear Pool & Spa Service in Cape Coral, Fla., says debtors are generally pretty quick to settle once they’re served with a letter of notification.
“Usually, they’ll call you hot to trot to pay,” Worsham says.
A cautionary tale
Whatever you do, don’t make the mistake in thinking you can repossess the equipment you’ve installed. Even though your client didn’t pay for it, it’s not your property. It’s your client’s property simply because it’s on your client’s property. Get it? It’s considered civil theft.
Any attempt to recover the equipment could lead to further disaster. Arouesty recalls a case when a pool pro, frustrated with his rich doctor of a client, disabled the pool’s equipment. In the process, he somehow disabled an electronic gate leading to the doctor’s estate. The client sued for $20,000.
Wrestling with the write-off
Retailers refer to dollars lost through theft as “shrinkage.” Maybe pool technicians can call theft of services “soakage.” However you phrase it, loss is an inevitable part of doing business.
Independent service pros who don’t have the luxury of an office manager overseeing accounts will have to determine for themselves when a payment is worth pursuing and when its best to just write it off.
For Simon, the answer hinges on how much he’s owed. “If it’s over $500,” he says, “I’m going to collect.”
Coming to terms
Laying out all the terms of service up front will help prevent headaches down the road. Here are several conditions pool pros have included in their service agreements to ensure timely payments.
Credit card required: A valid credit card number is required to schedule service. This card will not be charged without the express consent of the cardholder UNLESS a balance is not paid upon the due date of an invoice.
Finance charge: If a credit card charge is denied by the creditor, all service will cease, and a monthly periodic finance charge of X percent will be made on any balances past due.
Collections: You agree to pay an additional X percent, plus any court costs, if the balance is referred to a collections agency or an attorney.
Cancellation: Either you or we can cancel service at any time by providing 30 days’ notice. We reserve the right to cancel service without notice if you do not make payment(s) as agreed.