Getting paid ! Construction industry.

[Bubblehide]

Along with what has been said, you could build in several payments, based on progress of completion in which the price is say 100 dollars, but if paid before such and such date a discount is given and 75 dollars would be considered payment in full, for that portion of the job. The discount is an incentive to pay in a timely manner.

 

[KurtR]

In my 20 plus years in the heavy high way and supplying small commercial down to home owners I have found the smaller the company the fast and more prompt you are paid. The guy who saves all year for 10 yards of concrete will be into pay the next day. The company who is building a big project is always 90 days plus out and a pain in the ass to deal with. We have tried everything from liens to having to file on bonds and ending up in court. Only solution we have found is make them pay up to damn near even while they still need something once project is done you loose all leverage.

 

[bradmacmt]

A lot of unknown's here, but of course that doesn't stop people who know nothing about it from sharing their ideas - everyone can have an opinion, but not all opinions are created equal.

I'm a General Contractor, but I've also been in your position (in my case as a finish carpenter). When I get paid, subcontractors get paid. Depending on the situation, I sometimes will pay a subcontractor out of pocket if the client is late paying, but usually not - it just "depends." I always encourage my subs to turn in progress payment draws so that they have cash coming in. There are all "qualities" of GC's, just like there are all qualities of subs. Some of both are shitbums. Me, I hate it when my subs don't get paid, and will always make sure everyone gets paid before I get a dime.

The thing you may not understand since you're not a GC is not all clients pay the same way. The wealthier they are, often the slower they pay, since draws often go through elaborate accounting channels. I have some clients that give me a check within a day of receiving a draw request, and others who can take several months, in spite of my contract clearly stating I am to be paid every month. It's the life of those of us in residential contracting.

 

[FLS]

SOP for property management companies. Part of the problem is your payment probably has to be authorized by several people and just slows everything down. And they’re working on thin margins and want hold onto money as long as they can. Make them pay for materials up front and if it’s a longer project have a payment schedule set up. If a payment is late, work stops. Also, get to know their AP people, sometimes you can get your invoices pushed to the front of the line. Steady cash flow is a tough nut to crack for a small business. I was self employed for 20 years and it was always a challenge.

 

[Boarmaster]

I have been in the construction industry for all of my life. Owning my own business for around 15 years. I do business with general contractors, home owners and property Mangement. Home owners are always quick to pay. The others take their sweet time to pay. I have a GC I have worked with for 10 years. Last check took 78 days to show up. After years of this I decided a 30% price increase is reasonable for waiting. Property management is always slow to pay because they wait for the owner to pay them. I don’t have a contract with the owners, I have a contract with the property maintenance. How are guys dealing with this? Generally these are not huge sums of money. 5-20k I can’t afford to tell them to find someone else but they are killing my cash flow. I have heard of people charging interest but that seems hard to enforce.

I work in the commercial real estate business. I do a lot of commercial leases. Always waiting on a property management company to process my fees. I’m always the last guy to get paid. Sometimes up to 45-60 days after I invoice. I started adding that Landlord will direct their PMs to pay my fees within 10 days of invoicing. That has helped on new business but it's the same old routine on the old business.

 

[Hunt eat repeat]

This is unfortunately a game of leverage, and it sounds like they have more leverage. The best thing to do is discuss your concerns up front, and hope they are rational. Just know that if you charge any interest or set any liens, you will go to the back of the line on future opportunities. If you can afford to put your foot down like that, then more power to you.

Yes this is what I worry about. If I get to heavy handed then they will just find someone else. But also don’t want them walking all over me.

 

[WV Mountaineer]

I have been in the construction industry for all of my life. Owning my own business for around 15 years. I do business with general contractors, home owners and property Mangement. Home owners are always quick to pay. The others take their sweet time to pay. I have a GC I have worked with for 10 years. Last check took 78 days to show up. After years of this I decided a 30% price increase is reasonable for waiting. Property management is always slow to pay because they wait for the owner to pay them. I don’t have a contract with the owners, I have a contract with the property maintenance. How are guys dealing with this? Generally these are not huge sums of money. 5-20k I can’t afford to tell them to find someone else but they are killing my cash flow. I have heard of people charging interest but that seems hard to enforce.

It’s a certainty. If you do service work, especially trade work like building, you’ll spend a lot of time chasing money.


I started putting into my contract that a 10% fee on the over all price, would be applied to the balance if final payment wasn’t made within 3 days of work being completed.

What that did was ensure they went over everything with a fine tooth coin when I told them I was finished. Which is fine because I stand by my work. But, it’s something I point out before we sign the contract. And, it’s something I have never had to worry about since doing so.

Commercial work is completely different. By the time all the Barney fifes get through approving their part of it, you might have starved to death. It’s corrupt and unethical. But, people in general don’t care if you are paid are not. If they are a W2 employee, they get their rocks off knowing you are waiting on them. I don’t have an answer on that one.

 

[The_Jim]

This is so frustrating and in my opinion completely unethical. We try to avoid general contractors for this reason but many of the large corporations are doing the same in the manufacturing plants we work in - so its really hard to avoid all together. As a sub, you only have so much control...

Make sure your doing progress billing. The day your awarded the project send an invoice for materials and keep invoices coming regularly on larger projects. It helps if there are items with a long lead time, you can use that as leverage and not order them until payment is received.

 

[ELKhunter60]

I used to own a business where getting paid 60-90 days after the work was completed was pretty standard. If you couldn't live with those terms you didn't need to be in the game.

After talking to some business friends I learned you could go to the bank and see about a line of credit. Basically what would happen is the bank would allow you to take 50-75% of the invoice amount out on your line of credit and you would pay the bank back once you got paid. I paid like 1-2% over prime for this line - so it wasn't like the interest rate was huge (at the time). I'm guessing a line of credit is around 8% interest today.

I know a lot of people don't like going to the bank for stuff. I didn't. But I will say - doing this took a bunch of stress off me and allowed me to rest easy that I could make payroll every Friday. I still had issues like companies taking a year to pay and the bank not covering anything once it got out past about 120 days - but again - it was a great tool that allowed me to operate my business with less stress worrying about paying my bills on time.

 

[Marble]

We negotiate terms with people who are paying. 2% discount within 30 days for payment in full. This is for jobs with good margins. Net 30 with additional % added passed that.

On larger jobs or with customers we do not have a lot of experience with, we pre-lien the job sp that we have basically have collateral to go to if they don't pay. When they know we have that,they tend to pay ups.

If someone isn't paying, having a discussion with them will let you know where you stand. I just dealt with a long-time good customer that was 6 months past due by 120k. He was in the hole from his customer for 850k. We worked with him for 6 weeks and he was able to fully pay his debts in full.

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[Marble]

There are companies that will set pre-liens up for you for a fee. I was just quoted $350 for the work. The price depends on how big the lien is.

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[Beendare]

OP, I feel your pain.

I've been a contractor for over 40 years.

One thing that helps is strict progress payments and making it clear that to keep the job moving forward you have to have those payments. That leaves less of your hind end swinging in the wind at the end of the job.

Terms and a stick legal contract are good...but as you probably know- some of these folks will just slow pay you just to do it. Thankfully, I can weed out most of the slow payers early on in the Design/Build process.

 

[HighDesertHunter]

We are based in Oregon. Construction law here allows for 18% interest per year. Our T&Cs that our customers sign lets them know they will pay interest beyond 30 days. Along with a bunch of other stuff. DM me if you want to see some our out T&C pages. My experience has been that if you are upfront on the terms they don't run off if you communicate that you will be executing on those terms. They usually pay right away. Otherwise we are getting 18% return which isn't bad. We never communicate anger on collections, we just have a clear process that motivates them to pay which they agreed to. Then we execute the process when they don't pay. It makes it hard for them to complain. This is only part of the story including liens, contracts, scope, and other terms.

 

[schmalzy]

Im a commercial sub and deal with this. Honestly you don’t have a lot of leverage. Put whatever you want In your contract, but 9.9/10 times they won’t sign it or will redline it.

Best thing I can say is know the lien laws, be upfront, and don’t be afraid to play hardball and pull off. I’m fighting this on a larger project right now. They always pay, it’s just at 60-75 days.

Can you utilize your material vendors for credit?

Check out Amex business ljne of credit. pretty easy to qualify for if your personal credit is decent and you have a reasonable business history. Super easy to apply for with good rates.


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[Weldor]

Our contracts used to state X amount due 30 days.
X amount due after 30-45 days
X amount due 45-90 days.
Like most stated small outfits tend to pay faster than big. What I did not like was our outfit was late paying our suppliers something like 120 pay. Hard to have a good relationship with your steel supplier when he's not getting payed, but we expected our clients to pay on time.

 

[Kyle C]

Basically this. I work in the commercial side of it as an ironworker. We have retainage that's held back until the job ends. 10-20%. Sometimes it's years to get payment in full from the general contractor we're sub'd through.

Local 86 here. They sure get pissed when I take the month of September off, but love this trade.

 

[bozeman]

Overprice the bid upfront and offer 5% off if payment rec'd in 30 days or less. You gotta give an incentive today.....its just reality.

 

[IW17]

Local 86 here. They sure get pissed when I take the month of September off, but love this trade.

Local 17 here. Going on 16 years. I have mixed emotions about it. I enjoy my job, but the cut throat bidding mentality and overbearing jobsite regulations are taking its toll on me. Luckily, I've been a foreman with the same crew for going on ten years. As long as I give my owner a couple of weeks notice, I can take as many weeks off as I like. I try to take a week off every season to hunt something.

 

[IdahoBeav]

I am a civil PE and work for a private consulting firm doing land development design. We write into our contracts that invoices must be paid within 30 days and late payments will be subject to 12% annual interest. If no money comes in after several months, we stop work. There are several milestone EOR signoffs for site construction that are required for the building occupancy permit. If the missed payments are stacking up, I will hold off on executing these signoffs and tell the client that I need the invoices to be paid up first. This is very powerful leverage. If you let the developer/contractor/etc. receive the full and complete work that allows him to get paid before you are paid, he will often argue the charges and try to negotiate a lower fee citing whatever excuse he can. Developers are the worst. For some reason they seem to think that the AEC teams can serve as a bank that offers interest free loans.

 

[TaperPin]

I’ve been a foreman for GC, GC, sub for GC, carpenter for property maintenance GC, and now a fly on the wall for my wife’s interactions with multi family property managers and owners.

Slow pay is the main reason I got out of construction, and refused to be a part of commercial jobs. At the end I only worked for residential clients and required payment in full at the end of each week, and payment for anticipated materials for the upcoming week, or I packed up and went to the next client. Even draw schedules can be setup for weekly draws. Good clients with good pay history never complain. It’s BS that contractors shouldn’t ask for money up front - the best construction lawyer in the Treasure Valley said reguardless of contracts or terms, the side with the money always has the advantage and every contract has weaknesses - he loved the way I billed clients. One client was a construction attorney for a large corporate builder and showed me the ridiculously long contract that’s actually required to cover all the bases - like 75 pages long.

We know dozen of multi family management companies, and there are always a few that slow pay every time - even without a good excuse. When a manager’s bonus is based on financials for the property, even though the expense is incurred when it’s completed, big management companies sometimes have weird metrics that sometimes have a lot of incentives for dragging feet into the next quarter. There’s more disfunction in property management than most contractors realize.

I’ve worked for three crooks, maybe four, kind of five - it’s important to know how they operate. Crook #1 was the smooth talker that talked subs and suppliers into waiting until the big 96% draw at the end, then skipped town about every other year. We had big clients, even attorneys as clients. I could tell he wasn’t what he claimed because of the secrecy and he kept me and the other foreman in the dark - I warned all the subs something isn’t right, and every one that let him slow pay got stiffed. He disappeared and was tracked down in New York by a private investigator - he had done this for so long he was very good at hiding any assets and last I heard, even with a judgement against him the clients he screwed haven’t seen a dime.

Crook #2 was a master class in commercial construction rip-off. It was like living through a Donald Trump development project - not a single sub was paid the full amount, subs stupid enough to work without a contract were screwed completely, GC’s that agreed to have payroll pass through their books got screwed and there were many of them, even an entire team of accountants, marketing, architects, designers, and about 10 employee carpenters were constantly juggled and pitted against each other to cut each other’s throat and save money. $13M project and the asshat developer at the top just moves from big job to big job - talking BS nonstop. Legalized robbery.

Crook #3 might be seen as a crook, I think he is. I did a lot of finish work for him - turned out his family is in the bar business, and bars get sued a lot, so they are very good at being judgement proof. Building was leased from one corporation, construction tools and equipment were leased from another, and operating capital was handled by another corporation. The strangest feeling to wait at the bank until wages were deposited and we rushed the drive through - sometimes the guy at the end wasn’t fast enough and someone with a judgement against the company garnished all the money and the carpenter had to wait for more money to be deposited. If you get screwed by this guy, good luck trying to get any money out of him. I worked on his attorney’s house and the attorney explained how it all worked - his specialty was setting up multiple corps for high risk companies.

Crook #4 is an attorney that also owns a construction company and an engineering company. He sues contractors, uses his engineer to say something was screwed up, and then gets a bid to fix it from his GC. It’s a very successful way to get money if the original contractor was in the wrong or not. Legalized robbery. He was pissed when my bid required payment in full up front, and he couldn’t find anyone else to build it because of his reputation. I’ll dance the day he drops dead.

The funniest client that ever screwed me was a little old lady as sweet as my mother - she let carpenters work on her new house, claimed to go visit her sister for a few weeks, then refuse to pay when she got back. I was something like the 21st carpenter with a lien on her property - all her property and assets outside of the house were carefully hidden. She’s lucky nobody burned it to the ground.