“LBM Talks” hosts top professionals from different sectors of the lumber and building material industry to share their expertise, with a heavy emphasis on practical, tactical strategies to help you serve your markets and grow your business.
Join LBM Talks host, Thea Dudley, as she brings her razor-sharp expertise to dissect trends, regulatory changes, and offers real-world advice for credit professionals.
In this episode, Thea urges you to ask yourself what your breaking point is when it comes to filing liens. Tune into this short episode to get Thea’s advice on when and how to go about this process.
Please send any inquiries to thea@creditoverlord.com.
Prefer to read about it instead? Take a peek at the transcript below.
(Editor’s note: Transcript is AI-generated and may include some errors.)
Thea
Hey there. I’m Thea Dudley, also known as the credit overlord. And welcome to LBM Talks Credit. We are the only podcast that talks trade credit in the lumber and building material space. Never miss an episode. Stay tuned, and we’re glad you’re here. Thea Dudley here, and one of the questions I get asked most frequently is, when do I turn an account over to collections or file a mechanics lien? My answer is always the same. I don’t work at your company, so I don’t know what historically you’ve done. I don’t know what’s in your credit policy manual. I don’t know how you usually approach these so when I ask a credit manager that, hey, what’s in your policy? What have you guys done before you get an eye roll, maybe a blank stare, little bit of a it’s complicated. I don’t really know. We’re not consistent, or we don’t have a written credit policy. I’m going to walk away from that for a minute. That’s something for another episode.
But whether you have a written one or not, you absolutely have a historical pattern or process for how you turned it over, or your approach to filing a mechanics lien, because you’re not the first person to do it. Somehow this has been getting done. Start with that information. How do you normally approach this? Let’s talk about liens. First. They’re much easier because they’re cut and dry. There’s a finite time period that stuck to them. If you don’t file the lien by a certain period of time, you’re out of lien rights. That forces the conversation. There’s always the battle cry when we’re making a sale from sales, or maybe the CFO, or whoever you’re talking to that, you know, we have lien rights. We can totally lean this project if they don’t pay it. And that sounds really good if we’re going to use lien rights to either increase somebody’s credit line for a project or sell to somebody that’s maybe a little sketchy, or we’ve had some dealings with them in the past that didn’t go quite as well as we would have hoped. Then, yeah, that’s That’s great. It’s great that we leverage mechanics liens. It sounds really good, and everybody’s all for it, until some credit manager comes along and actually wants to file the lien. That’s where the real fun starts.
And I mentioned filing a lien, since we haven’t been paid and we’re coming up on deadlines, it’s not my go to move. It’s not hey, I’m having a bad day. This guy angered me, and now I’m going to just lean his project, because that will make everything better. We’re coming up on deadlines and haven’t been paid, and now suddenly I have a sales rep looking at me like one of the Real Housewives of Beverly Hills figuring out this credit card just got cut off. There’s panic, there’s dismay, there’s outrage, there’s full range of emotion, you know? And he’s asking, you know, why can’t we wait? Customer said, another week? Well, sure we can, we can wait. We can roll the dice. Wait till the last minute. If we wait till the last minute, the deadline to file our lien, we might not get it filed in time, and if we do, it’ll cost us three times what it normally does, because rush job equals. You pay more. It’s supply and demand. Best thing you can do with with liens, and when you when you do them by is before you lose the lien, right?
So draw your line in the sand. I try to use a guide of two weeks prior, two weeks before I have to actually have the lien filed. I go ahead and get all the paperwork done. I get it turned over. I let the customer know I love everybody knows this is happening. They might not always remember we had the conversation, but everybody knows it’s happening. You can always release the lien. You can’t get time back, and you can’t get your lien rights back. You can’t have it both ways. If we’re going to use lien rights as a way to upsell or even sell a customer, then we’ve got to be prepared to file the lien if it comes to that, that’s what our deal was. That’s what we agreed to. Good thing about liens a lot of time period, easy peasy, not saying there won’t be some drama, but if you make the decision to forgo lien rights document, who you had the conversation with and why, and this should be the exception and not the norm, and the answer is, always, file before you lose lien rights, and in enough time to actually get the lien filed.
Now accounts to collections. That’s a different story. Just like liens, nobody likes to pull the trigger. Nobody likes to say, Yeah, we’re shipping this off. It feels like a failure. You’re upset. You keep hoping for the best, so it sits on your AR way longer than it should, and it’s the same logic that surrounds filing a lien. Nobody wants to move the account to the next level. If you turn it over to collections, they’re not going to buy from me. Well, let’s see we’re contemplating a legal. Action, either a lien or collections attorney, whatever it is, which means they’re not paying and not paying, to the point that this is where we are turning someone to collections or filing a lien. Is not our go to move. It’s not the first thing we’re going to be doing. We’re not selling them now. So is this really the hill you want to die on? You know, my charming sales buddy right now, this is charity for us. And how long do you want us to wait to get paid? We’re just using hope as a credit tool. And how many broken promises? How many promises to pay? Where’s your line? I have a three strikes rule. Three strikes, you’re out. You’re going to collections, you’re getting a lien filed, or third time’s a charm, and you pay me, we get something worked out.
If you’re getting nowhere on the account, you’ve made multiple phone calls, had broken promises to pay, emails, text, you’ve tapped in your sales rep. Sales Reps not getting anywhere. Or the customer keeps saying, just, just keep hanging in there with me. That’s not a plan. If the customer won’t email, call, respond, if they’re not able to come to the table with something, then you know it’s time. Do you make the decision turn it over and get on with your day? Or do you need to have five levels of people sign off on it, and then they have to vacillate for a few days, and you have to come back and go, Okay, can we turn this over to collections? Can we turn this over and take their temperature on it?
I’ll give you a tip if you wait long enough, the decision gets made for you while you’re waiting periodically, seeing this on your AR and overthinking it your customers living with their life. They’re going on with their day. They’re not giving you a lot of thought. They’re trying to keep themselves afloat. And here’s the thing about inaction, it’s still in action. It’s a choice, and if you wait long enough, that choice gets made for you lose lien rights or any shot you may have at getting paid by an incredibly delinquent account.
I’m not saying run amok and pull the trigger haphazardly. Have a guide of how you handle and approach your breaking point. Third time’s a charm for me with my breaking point that that rule of three, I’m not saying I don’t ever go outside of that and try to work with somebody, but I have exceptions that are not rules. I put something in place because I can’t just go on indefinitely. I never want to let go of lien rights, but I understand sometimes we’re going to make a business decision, and I may not agree with it, but I’m still going to push for us to lock in those lien rights.
If somebody says, you know if our if our CFO or company president, says we’re going to walk away from this, I document it, and I get on with my day. Once an account crosses from customer to deadbeat, is when I ship them to collections, not calling me back, multiple broken promises, blowing off my sales rep, you are the guiding beacon for your company. On these accounts, who do you need to give a heads up to? How many layers do you have to go through before you can ship them off? Define your policy. Take this opportunity to write out the process, see where those gaps in pain points are, and ratchet them down. Make it more simplistic and something that makes sense for your company, and that wraps another edition of LBM talks. Credit.
Never miss an episode with us. Follow us on Apple, Spotify YouTube, mash the like button. I’ll see you every other Tuesday. I’m Thea Dudley. We’ll catch you next time. And I hope you’re serious about your AR, because we are.
