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  • March 05, 2019

    Agricultural Clients: Help them Get Paid

    Getting paid on time can make the difference between success and financial difficulty for agricultural custom operators who deal with large accounts. J. David Krekeler talks about helping custom operator clients to stay on top of collecting their accounts receivable.

    J. David Krekeler

    Most businesses experience difficulties collecting accounts receivable. Each industry has its own particular problems. In this article, we explore both common and unique problems facing your clients who are custom operators – such as custom harvesters, custom planters, and manure removers – when they collect their accounts receivable.

    There are basically three types of customers when it comes to collecting agricultural accounts: those who pay on time, those who pay late or sporadically, and those who are bad news – those who do not pay or are difficult, because that is who they are and how they do business.

    David Krekeler J. David Krekeler, UW 1979, has been solving financial problems for farmers since 1983 and is a founding principal and shareholder with Krekeler Strother, S.C., Madison.

    Providing services without being paid in advance is a problem that lawyers can understand. There is nothing as valueless as a service already rendered. So custom operators must be prepared, vigilant, and proactive.

    The process for collecting agriculture accounts receivable for custom operators can be divided into three segments: information, documentation, and action.

    First: Gather Information

    The first step in getting paid is gathering information. Learn as much material information as possible. Doing so can let your custom operator decide whether to take the job. It can avoid conflicts and future problems, and can better ensure payment. The more your client knows, the greater the profits.

    Information that can be essential when it comes to evaluating customers and collecting accounts includes information, such as:

    • names;
    • Social Security numbers;
    • addresses;
    • bank accounts;
    • personal financial statements;
    • assets; and
    • liens.

    Some of this is public information and readily available. Your client should know how to use Wisconsin Circuit Courts Access Program (CCAP) to see if there are active legal proceedings or prior judgments against prospective farmer customers.

    Your client might also check the Wisconsin Department of Financial Institutions to review UCC financing statements. Knowing what liens are out there can be valuable.

    And of course, the internet now provides a wealth of information. Consider reviewing prospective customers on Facebook, LinkedIn, and other social media.

    Use a Credit Application

    For large operators or large accounts, your custom operator client should be utilizing a credit application. Your application is an easy way to gather the essential information described above. It can also set forth the terms for the account, such as interest or late charges. It should also include a personal guaranty if the customer is to be an LLC or corporation.

    If you would like a copy of a credit application we use in our practice, simply email me.

    Obtain Financial Statements and Tax Returns

    Obtaining a copy of the farmer’s personal or business financial statement is also helpful. This should be easy to do, as most banks require yearly statements, even when no new loan is being made or when an existing loan is current.

    Tax returns are another segment of information that should be readily available. Everyone must do their tax returns.

    Second: Document the Agreement

    If the information is obtained and your custom operator client is willing to take on the work, the next step is documentation of the arrangement. This would include contracts, personal guaranties, and liens.


    Contracts should be in writing. Some of the items to document are:

    • identify the customer (person, LLC, corporation);
    • payment schedule (bonus or incentive for payments);
    • methods of payment (acre vs. hour);
    • guarantor;
    • identification of collateral/granting of security interest;
    • responsibility for providing fuel, supplies, labor and equipment;
    • anticipated schedule of work;
    • how delays will be handled;
    • interest charges; and
    • attorney’s fees and costs of collection.


    If your client wishes to charge interest, be sure to explain the specific requirements of Wis. Stat. section 422.210. Agricultural credit transactions are not subject to finance charges or fees, unless the charge or fee is clearly disclosed in writing to the customer and is agreed to by the creditor and customer.


    Security interests are often the key to getting paid. Do not let your client handle this matter without your help. Security interests must be granted in writing. The lien must attach to the underlying asset. And the lien must be perfected to make it effective against third parties.

    Depending upon the type of service your custom operator is providing, your client might be entitled to a priority lien as a production-money security interest under Wis. Stat. section 409.1035. To qualify, new value must be given to enable the farmer to produce crops.

    Probably the most common form of custom operator in Wisconsin is custom harvesters. Your custom harvester clients may be entitled to a lien for threshing, husking, or baling under Wis. Stat. section 779.50. This lien is available for threshing grain, and for cutting, shredding, husking, or shelling corn, bales of hay, or straw.


    If collateral is not available to secure the debt, perhaps the next best choice is a guaranty. These are often critical if the debtor is a limited liability company or a corporation.

    When accepting a guaranty, go back to the information step. Try to ensure that the guarantor has sufficient income or assets to pay in the event of a default by the farmer. A shell company or an uncollectible individual is not particularly useful as a guarantor.

    Third: Taking Action

    Taking action early is important to improve the likelihood of collection. There are many studies that show the likelihood of collection drops to 50 percent or less if the account becomes a year delinquent.

    The actions your custom operator clients should take fall into four categories:

    • Communication is critical. Much of this was already dealt with in the information and documentation phase, but ongoing communication about problems and changes should be maintained.
    • Bill early and often. Billing timely and in a way that is understandable to the customer is just as important for custom operators as it is for lawyers.
    • Manage accounts receivable. Invoices should be followed-up on promptly if they are not timely paid. A personal communication is probably best. Find out why the bill is not paid. Be specific if promises are made. Payment promises should include a date of receipt and the amount to be paid.
    • Consider collections. Discuss with your custom operator when to commence the suit. Always consider the costs and benefits when proceeding with litigation.
      • The information and documentation may have a major bearing on how you proceed with collection. Whether the farmer is collectible can influence and ultimately decide whether to proceed with the suit.
      • Your client must understand that simply winning a lawsuit is not enough. The next steps will be to proceed with garnishment or attachment.
      • Be sure to explain that continued collection pressure could end up resulting in a bankruptcy filing by the farmer. That possibility should have been discussed before the suit was even filed.

    Be Proactive

    Customer operators often deal with large accounts. Not being paid by one or two of those customers could result in financial ruin for the entire year.

    Although it is snowing as I write this article, we are approaching the spring planting season. Now is the time to begin those discussions with your custom operator clients about how they will select, work for, and collect from their farmer customers.

    Do you have ideas about the options available to custom operators? If so, please let me know at

    Save the Date: 'Considerations for Starting a Law Practice' is May 4

    The Solo/Small Firm & General Practice Section Board is happy to announce the return of the popular CLE workshop, “Considerations for Starting a Law Practice.”

    This CLE workshop is designed to guide participants through the planning and starting of a solo firm. It is Saturday, May 4, 2019, at the State Bar Center in Madison. For more details and registration information, see's Marketplace.


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