Running a farm means running a business, but sometimes that’s hard to remember when you get caught up in busy times like harvest or calving. Sometimes it’s hard to remember, too, because farming offers so many temptations.
After all, who wouldn’t rather grab a wrench and head for the shop than grab a phone and track down the money that you’re owed?
It doesn’t matter whether the amount you’re owed is a small sum for selling a cord of wood or a significant amount for combining hundreds of acres, collecting payment for your labour or goods is part of doing business.
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And like most aspects of running a business, it’s a lot more successful — and a lot less of a pain — if you have a process for handling outstanding accounts.
Country Guide asked two financial advisers to weigh in on how to collect what you’re owed. Below are practicals tips from Ken Childs of KC Financial &Management Consulting in Tisdale, Sask., and from Carl Moore, farm financial adviser at Woodstock, Ont.
Both advisers agree. The following practical strategies on invoicing and debt collection are exactly that, i.e. practical. And Childs and Moore also agree, there’s no better time than today to implement them.
Moore and Childs aren’t in the business of offering legal advice but have provided general considerations for farmers who find themselves in the uncomfortable position of being owed money. Establish a system and standardized communication approach before problems occur, they recommend.
Always use your best judgment, regardless of the situation. If you are concerned there may be good reason. And don’t procrastinate. Early attention often yields the best results.
Step One: Get it in writing
If you hire out custom fieldwork or trucking services, for example, or if you sell animals or equipment, it’s essential to establish a systematic approach. As a first step, consider printing a flyer or leaflet that provides customers written documentation of your rates, terms of payment and contact information. This eliminates many misunderstandings before they start, including about common areas of disagreement including prices and rates. “Get rid of as many obstacles as possible,” says Moore. “Put everything in writing.”
Step Two: Punctual invoicing
Be timely with your billing. You can’t expect payment if you haven’t provided an invoice. Delivering a bill immediately after the product is sold or the work is completed also curbs the risk of future misunderstandings. The longer you wait to send out your invoice, the more time both parties have to forget, leading to potential disagreements. Besides, it’s easy to carry invoice forms in the tractor or farm truck that can be filled out once the work is done, so they can then be delivered immediately or mailed the next day. All invoices should include detailed contact information, rates, and terms of payment. Also consider offering a discount if the invoice is paid by a certain date. The added incentive might move your bill to the top of the pile, but be sure it is all spelled out in black and white. Moore also recommends a monthly billing system if you conduct regular business with your customers or clients. Bills that come on a monthly basis are often the ones paid first. Standalone invoices meanwhile may be consigned to the “will pay with whatever is leftover” pile, leaving you waiting for your payment.
Step Three: When payment is late
Follow up promptly if payment is not received. “You have the right to ask why the payment has not been received and when it can be expected,” Childs says. Re-submitting the invoice, a simple phone call, or a visit can serve as a reminder to pay the bill. Moore says a personal visit is reasonable after three months if you have not received payment. At that time it’s important to be specific in your discussion and Childs reminds farmers that if you agree to extend or change payment terms, make sure you get it in writing.
Step Four: Last-chance payment
After three months Moore recommends sending a letter stating the invoice is overdue and requesting payment within 10 days. Seeking legal action may be the last thing you want to do, but it doesn’t hurt to include a statement saying if left unpaid you may take collection action. Take a look at the fine print on some of your farm or household bills to develop the appropriate wording. Moore also says it never hurts to include a reminder that collection action does result in a blemish on credit records and could make future credit applications difficult. At this point in the collection process a payment schedule may be requested to settle the bill. Again, be sure to put everything in writing.
Step Five: Taking legal action
It’s important to know your legal rights and obligations, and Childs recommends obtaining legal advice early. The last place you may want to go to for the money you’re owed is small claims court. Nevertheless, it is sometimes the only way you are going to get paid. Lawyers and paralegals can assist you in this process and in some areas short courses in debt collection are offered, which you may consider attending if you frequently find yourself in the collection position. Still, the goal of your invoicing strategy should be to solve most billing issues long before the idea of going to court comes up, preferably by solving them before the disagreements even begin.
Step Six: Register your securities
One last point farmers should consider is registering securities, a good idea for those buying and selling livestock or equipment. Childs says documentation of securities is prudent, because if ownership and related issues can’t be proven, you may be subject to “he said, she said” arguments and having a court decide what the agreement actually was. Again, seek legal advice, and as always, keep good records.CG
