Tips Can Help Ensure Drillers Get Paid
March 26, 2013
Attorney Tim Williams has worked with well drillers for decades. I caught up with him and his colleague Adrienne Knack before their presentation at the recent Michigan Ground Water Association convention. Their goal: to help make sure your drilling isn't charity work.
Attorney Tim Williams calls the contracts that drillers have “completely nonstandard.”
And he should know. Williams has worked with well drillers for decades. I caught up with him and his fellow attorney Adrienne Knack before their presentation on billing best practices at the recent Michigan Ground Water Association convention in Acme, Mich.
“The interesting thing about the drilling industry is no two drillers think or operate alike. There’s a lot of individuals in the industry, so we have never seen two contracts that have been the same,” Williams said.
“There’s different issues that drillers in different areas are dealing with in terms of the land,” Knack added.
Williams and Knack are part of Williams & Associates, which has Michigan offices in Brighton, Cadillac and Mount Clemens. They have dispensed advice to drillers in Michigan for years, but their suggestions could apply anywhere.
Williams says a signed contract is the first step to making sure drilling isn’t charity work.
“There are two aspects to being able to effectively collect from customers,” Williams said. “One is what we would call the pre-work phase, where we have an effective customer contract. You use best practices to give an estimate to customers-not final prices-because drilling is different than any other kind of construction. I can get a firm contract to have a family room put on my house; I can’t get a firm contract to have a well drilled because I don’t know how much it’s going to be until it’s done.”
Then, Williams says, comes the post-work phase.
“We have a very strict routine that we suggest to drillers that they follow. We suggest they get final payment on the day the work is done. And if they don’t, to bill within eight days. If they don’t receive the money within 15 to send a first letter, and then a second letter and then a third letter. We also suggest they file a security interest on the property with the register of deeds. That gives them priority over mortgage lenders and other types of liens.”
Lastly, Williams writes into client contracts the right to go on a customer’s property to retake equipment if payment isn’t received. Of course, drillers don’t want to go back to rip out a customer’s casing and pump, but they also don’t want to face trespassing charges if it comes to that.
Because of the “nonstandard” nature of the industry, Williams also urges drillers to make sure they have different contracts based on the areas in which they drill and the type of drilling or maintenance performed.
“A typical contract in the southwest side of the state would be very different than any other part of the state … because the geology’s very different. Also the drillers in the southwest part of the state have less to worry about economically because they’ve been less affected by the downturn. And then there are different sized drillers, all the way from a one-person operation to several employees to geothermal work up to 42 inch wells-that’s a very different scale. Legally, what they need is quite different than the smaller drillers.”
So, after years helping drillers with contracts, what is the common, easy-to-fix problem many of them make?
“Probably the common mistake is when they do business the way my parents did, by handshake,” Williams said. “They don’t use a contract; they don’t follow up with billing. Billing’s done kind of haphazardly; they don’t really have a person who does it. So, I understand it can be difficult to drill all day and bill all night, but the farther the billing gets away from the job the less likely you are to collect statistically.”
He recommends drillers large and small use a professional for billing, even if they’re too small to have their own billing person in house. “I think that an outside bookkeeper who also does billing with a system like QuickBooks can be very effective.” Williams also urges drillers take advantage of resources like his class and other similar presentations given by MGWA and other associations around the country.
“I would say routine, too,” Knack said. “They have to stick to a (billing) routine.”
Williams sums it up. “Have a contract, get a deposit in the form of a check, photocopy the check and then start the billing right away. So, it’s a discipline.”
“Those that do it need people like us less, because they’re not having issues.”