Torrington Supply figures the best way to get their money is to help customers collect theirs.

An attentive crowd was treated by Torrington Supply & A.O. Smith to dinner an valuable collections advice.


PHCP distributors have been whacked from two directions. Slack demand has depressed product sales while the recession and credit crunch have caused many payment delays for product already sold. “Delay” in too many cases amounts to wishful thinking that the money will eventually arrive. The harsh reality is that a lot of people at all levels of the supply chain are getting stiffed these days.

Collection agencies are on speed dial in many supply houses, but that’s a money-losing last resort and it doesn’t do much good to squeeze contractors who have no money. Torrington Supply Co. (Waterbury, CT) has taken this bull by the horns by hosting a seminar for its customers on collections management, coupled with dinner at a local restaurant to help boost attendance. Several years ago Torrington Supply hosted a similar event and it was well received at the time.

“We’re grateful to all of our customers for their loyalty over the years,” said Torrington’s Director of Sales Chris Fasano. “Helping them out in a time of economic crisis is the least we can do. We looked at the two areas where our customer base is feeling the pain right now - generating sales and collecting for their services. We focused on collections immediately because when our customers get paid, our customers’ businesses remain strong.”

“Our customers have seen a drastic change in payment patterns, and so quickly that many of them are unprepared to weather the storm,” noted Torrington Credit Manager Cheryl McPhail. “They are not getting paid for the services they provide, and at the same time the credit environment has tightened so drastically that getting a line of credit at the bank is not a viable option.

“Many of them have never had to deal with collecting on bad checks, filing mechanics liens, filing small claims or just making collection calls,” she added. “In light of that, and considering the current economic and credit environment, we wanted to provide our customers with the knowledge and tools to assist them in protecting their businesses.”

From left: Barry Wolff, president & COO, Torrington Supply; Jason Gagnon and Thomas Sansone, Carmody & Torrance; Chris Fasano, Torrington’s director of sales.

Co-sponsored by A.O. Smith, the collections seminar was attended by HVAC and plumbing contractors, GCs, builders and remodelers, and electrical engineers. The two-and-a-half hour presentation was conducted by Tom Sansone and Jason Gagnon from one of Connecticut’s top law firms, Carmody & Torrance.

“I found the collections seminar informative, interesting and easy to understand. It’s nice to know we have a supplier that cares and offers the help we need to survive in a poor market,” offered attendee Frank Russo of Russo Plumbing & Heating.

Also attending was Emilio Espejo, vice president of  sales and project management with M&O Corp., who noted, “As contractors, we tend to believe that selling is more important than collecting. In reality, it is the other way around. A smart contractor needs to be educated on ‘self-help’ remedies like the ones presented at the seminar in order to minimize costs incurred in professional legal counsel.” 

Here are 10 of those “self-help” remedies covered by the attorneys from Carmody & Torrance:

1. Prescreen potential customers before providing goods and services to them, to prevent collection problems before they occur.  Use a credit application for individuals, which lists the customer’s employment and residential histories; frequent job and residence changes could be a sign of a person with unreliable income and bad credit. With commercial clients, check the Better Business Bureau’s Web site to determine if complaints have been made about those companies. For individuals or companies, check their litigation history on state judicial department Web sites, to determine if they have already been sued for not paying debts. Check for bankruptcies through the federal court Web site, “PACER,” found at www.pacer.uspci.uscourts.gov.

2.  Use written contracts  that make it clear that the customer will be liable to you for all costs of collection that you incur, including reasonable attorney fees. Also include a provision allowing you to impose a finance charge on all balances not paid within 30 days. If a customer has a choice of which bill to pay and which not to pay, the customer is more likely to pay the bill that includes penalties for non-payment.

3.  Keep copies of the customer’s checks  that are used to pay you. If you need to bring a lawsuit, those checks will tell you where the customer maintains a bank account. That will make it easier to collect on any judgment that you eventually obtain.

4.  Keep good records of the work you perform, including receipts for all materials that you have purchased for use on the customer’s job. Good records will enable you to substantiate the amount that you claim you are owed. In particular, if you are being paid on a time and materials basis, keep good records of the amount of time that you spend on the particular tasks and phases of the project.

5. Obtain personal guarantees of payment  from the individual principals when working for a customer that is a corporation, limited liability company or partnership. If the principal of a company knows ahead of time that he will be liable if his company defaults on its payment obligations, that principal will have a greater incentive to ensure that the company pays your bills.

Torrington’s Credit Department staff, from left: Grace Jimenez, Manager Cheryl McPhail, and Liz Gempka.

6. On large jobs, obtain a payment bond  from your customer, which gives you the right to make a claim against the surety that issued the bond, in the event that the customer defaults on the payment obligations to you.

7. On large jobs, obtain a “stand-by letter of credit”  from your customer. This is a document that gives you the right to obtain payment from the customer’s bank, in the event that the customer fails to adhere to the payment terms of your agreement.

8. When doing work on real estate, don’t wait more than 75 days  after providing the last of your services (or substantially furnishing the last of your materials) before recording a mechanics lien for any amounts owed to you. The lien must be filed within 90 days of the last date upon which you performed substantial services - but, preparing and serving the lien form properly may take several days. Furthermore, the lien form must be filled out in strict compliance with the mechanics lien statute; unless you have a lot of experience in properly preparing and recording such liens, seek a qualified attorney’s assistance to do so. (Editor’s note: Lien laws may vary in different states.)

9. Use the Small Claims Court  when the amount of unpaid debt is $5,000 or less.  It is designed to be “user-friendly” to non-lawyers, and the rules of evidence and civil procedure are greatly relaxed to make the process easier to navigate for non-lawyers. It is truly the “people’s court.”

10. Never threaten a delinquent customer.  That could backfire and expose you to a claim for harassment or infliction of emotional distress.

The collections seminar is one of a series of instructional programs planned by Torrington to help its customers navigate the intricacies of business management.