To improve the odds of getting paid for your custom harvesting services, get those bills out quickly, advises George Twohig, a Chilton, WI, attorney.
Twohig is one of about five lawyers in that state who know the trials of custom harvesting. He's helped harvesters develop contracts — and collect payments.
“Usually, when people get their bills shortly after the work is done, they don't have time to think of things that went wrong, or other debts,” Twohig says.
But the key to getting paid in the first place is to be clear about what you're offering — and for what price. A written contract should do both.
Before your client signs a contract, however, make sure the right entity is represented. “Today the question is: Are you contracting with the farmer or with a limited liability company of which the farmer is an owner?” That needs to be clear on the contract, he says.
“It's especially important to verify the financial stability of the entity,” Twohig adds. He advises getting letters of credit from new clients with large operations. “Those clients can represent a large share of a harvester's annual income, so you need to be assured that there is adequate money … and you aren't inheriting a problem.
“We think if we do anything like that people won't buy from us, so we kiss their feet and later pay the price. Guarantees affect sales,” he admits, “but they sure help collections.”
Another way to help ensure payment is to gain a security interest — a lien on milk produced, for instance. Many state statutes have thresher's liens that allow harvesters to place liens on harvested crops for the value of the unpaid services provided, he adds. If your state has such a lien law on its books, you may want it noted in your contracts.
“It's also important to have a clear picture at the beginning as to what the total amount of the charges will be — or at least a close estimate — so the person can be ready to make payment.”
The burden of proving a client didn't pay his or her bill is on the custom harvester, Twohig reminds. So keep good documentation. File copies of the contract, records of written exchanges, even notes from phone calls with the client, besides field records, receipts and paid invoices.
Be sure to also give proper notice when a payment's late. “In most states you have to be careful that your collection practices meet the laws of the state.
“Try to make an arrangement with the debtor to get payment without a lawsuit. Lawsuits just spend a lot of money for both parties. Often you'll be able to get a promissory note from the person with some course of payment, or a security interest or a lien or mortgage on the property. Or even an admission of liability that he owes the debt so there's not a fight that goes on later. You just need some basic agreement.”
If you're really stuck, that's when you may want to look at the court system, he adds. “Hopefully, by doing good credit review, quality work and having good contracts and good communications, you're dealing with people who have the ability to pay and want to pay.”