Monday, 31 May 2004 17:00

The check is in the mail... or is it?

Written by Lee Amaradio, Jr.
I am waiting for the day that my credit is so good that I can walk into a fancy restaurant, order a five-course meal, and let the owner know that I will pay him in thirty days. Or go to a grocery store to purchase food and supplies for my family of five and tell the manager that I will pay him after my dad looks the bill over and gives the okay to pay.

These are the same things that our industry has accepted from the insurance companies. Why? We provided excellent service, produced quality repairs at an agreed upon price - all in a timely manner. The contract was fulfilled with our client (remember that line). So the question remains why are we not getting paid when the car is picked up?

While there is no absolute solution to this problem, there are alternatives that can help maintain your non-DRP accounts receivable to zero over thirty days. If you have a good office staff and your estimators are good at getting approvals from the customer while making good notes, this should be a snap!

First of all, always remember that your contract is with your customer, not the insurance company. The agreed-upon price for repairs is authorized by the insurance company, but as your paperwork reflects, the owner is responsible for payment. The customer must be notified up front that when the job is complete, payment is due in full when the vehicle is picked up. Payment in full is the customer's responsibility.

A lot of you are probably thinking, "That's going to scare my customer away." It is incumbent upon you to explain to them that if the insurance company has accepted liability, they will pay the bill. Let them know that the checks are going to be sent to them directly and to be on the lookout for them.

When the adjuster comes out to negotiate the repairs, explain that the check is to be sent to the customer and not to your shop. Don't freak out! Remember, the contract is with the customer, who is responsible for payment. Call your customer and go over the estimate and amount. Get approval and remind the customer to bring that check in when the vehicle is completed.

Some of you may be saying, "That sounds great but what if I need a last minute part or a part price increases?" Handle this situation as soon as possible with the vehicle owner. Follow the same procedures as above, but when you call the customer present the option of paying the supplemental amount, since a check will be coming from the insurance company. The other option is for the customer to wait for the check and, when it arrives, pick up the vehicle.

The story gets good

How many of you have called the insurance company to find out where payment is and they tell you those famous words: "The check is in the mail." Oh yeah and I love you too! This prompts you to call your customer and explain that you cannot release the vehicle until you receive payment. The customer in turn calls the insurance company and starts demanding that your shop be paid. The insurance company tells your client: "We don't understand why they are holding your car hostage, we told them that we were going to pay them." Your customer then calls you back and starts screaming at you to give them their car as the insurance company said they were going to pay you! Anybody getting nauseous yet?

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If you follow the above steps in the beginning of the transaction, instead of your customer screaming at you, he or she will be screaming at the people that should hear it. That's right - the insurance company. They've already been told to send the check to your customer, therefore it is their responsibility to get that check to your customer. This makes it personal with your customer and the insurance company, leaving you in the clear. The insurance company gets an earful and I can almost guarantee you will get a call from the adjuster begging you to release the vehicle. Feeling a little better? Who's in the drivers seat now?

On top of this, if the check is inadvertently sent to your shop, call your customer to come pick up their vehicle or mail the check to the customer. Either way you are covered, and your accounts receivable will drop. You will no longer have to make phone call after phone call chasing the money that is rightfully owed to you. This will free up time for your office staff to be more productive and alleviate one source of stress.

In this way, you are legally keeping the commitment where it belongs - with your customer. When the repair is completed, it is up to the customer whether to pay the bill or wait for the check to pick up the vehicle. You fulfilled your commitment to repair the vehicle and now are entitled to be paid.

DRPs are another story

As far as DRPs are concerned, a staff person needs to stay on top of these accounts. My experience is that if you have not received payment within ten days of sending the file up, you are not going to get paid. Start calling on it immediately or prepare yourself for a battle.

If you let it slide for twenty or thirty days without following up, you have just increased the delay. Claim reps file these claims away since they want them closed as soon as possible. Once they are filed away, there is tendency for the case to fall through the cracks. Furthermore, at this point, without the customer's input, there is little incentive for speed on the part of the representative.

Hopefully this technique will help you collect your hard earned money and let you direct your attention to serving your customers by performing quality work.

The author of this article is known by Autobody News to be a credible member of the collision repair industry. We have chosen to run this story without a byline because the writer fears possible repercussions to his shop by certain insurance companies.