Getting paid ! Construction industry.

[Hunt eat repeat]

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.

 

[WeiserBucks]

It's a contract, if you want to be paid in x number of days, put it in the contract.

 

[IW17]

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.

 

[grfox92]

You need to tell them before you start the work as well as put it in the contract. The bill is subject to interest if payment is late. You are not a bank, you need to get paid when you say you get paid.

 

[Subliminal1]

Contract with certain triggers for payment... however creative you want to get (x days, x amount of project finished, etc). Get deposits to start work. Create a quote, get it signed, spell out payment terms, and have a clause spelling out fees if late to pay.

 

[missjordan]

Have strong boundaries and expectations that you also enforce. I would require a deposit up front then the rest paid upon completion or something along those lines.


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[Reburn]

You can put whatever terms you want in your contract.
Bake the interest into the price.
Send intents to lien on time per your state. You can pay someone to do this. Bake it into the price.
Intent to lien notices generally get shit moving.

 

[IDVortex]

I'm actually in the process with a law firm on writing a contract for my business. That'll have payment terms and conditions in it. If people don't pay, look into your states lien laws. If they don't pay, have a lawyer send a intent to lien letter to them.

 

[IDVortex]

As a contractor who got tired of it, and was burned badly due to family ans pretty much lost my business to now restarting my business, I'm skittish of payment, but this time I'm having a lawyer make a contract. And I'll only be doing work per the contract, and I expect to be paid by the contract terms. I'm not a bank, I'm not a credit card company. I am a business to make money, and if you hire me, you're value of the property is going up, you can afford to pay me. Or I'll take your shit. I'm not losing everything including my own confidence again.

 

[j_volt]

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.

 

[CorbLand]

I am on the other side of this. I pay the contracts for work done. We rarely pay early and if it doesn’t have payment terms, you will get paid when we feel like it. Ok, generally if there are no terms, we pay in 30 days of receiving the invoice.

Spell it out and stick to what it says.

 

[RC_]

Need payment terms in the contract and a way to enforce them. It's also very common for companies to offer discounts to incentive faster payment if you're willing to trade cash flow for slightly less revenue. Depending on the size of your operation, customers, and your financial controls this could be an option Look up 2/10 net 30 if unfamiliar with concept.

 

[IDVortex]

Need payment terms in the contract and a way to enforce them. It's also very common for companies to offer discounts to incentive faster payment if you're willing to trade cash flow for slightly less revenue. Depending on the size of your operation, customers, and your financial controls this could be an option Look up 2/10 net 30 if unfamiliar with concept.

Or charge a higher rate so when you do this, you're not leaving money on the table, and if they don't pay early or on time, youve.made more.

 

[HuntHarder]

Terms on the contract but be careful how you enforce them. If you can afford to lose clients, take a hard nosed stance like some have recommended. If you prefer not to go down that path, hope that your contract language is enough to spur a payment on time. I know, from experience, that a Hard nosed stance some times cost you more than it saves you. Construction, unfortunately, is very bad in general on prompt payment.

 

[actionshooter]

I work in commercial construction so it's a little different... 6 months isn't unheard of, I have projects that are well over a year, and we have some projects with retainage (5% standard) that are out 2 years currently. This is where a good amount or working capital is mandatory and costs are worked into our bids and overhead. We aren't slow to file a lien if it's a client we don't work with on a regular basis, but that can get touchy with our regulars so that is a case by case basis.

Like others have said, have your standard contract verbiage written up by a pro to include a payment and interest schedule, make it clear along with verbiage about when you will file a lien. Small companies shouldn't struggle because of slow payments.

And for everyone who says just charge more.... that's a good way to price yourself out of the market when the bids are as close as they have been in my region.

 

[CCooper]

It's a contract, if you want to be paid in x number of days, put it in the contract.

This- Inclusions, exclusions, stipulations, and assumptions- Get them all in your subcontract. We have stopped charging interest for late payments and go straight to attorneys. Call a GC’s bonding company if needed, that almost always gets them eager to settle up.

 

[Nine Banger]

Are you ever losing any work that you can't get to but could do for property owners if you weren't tied up with other jobs for contractors and property managers?

If you could pick up more property owners and dump the contractors and property managers you'd be better off and work the same amount with less trouble.

I'm twice as hesitant to work for another contractor as a PM but as you know we have no control over how the PM will handle the end user and it makes us quite vulnerable.

The way I dealt with this is to work for only 1 contractor (same one, 10-12 jobs per year), 3 property managers (one is great, one is ok and one pays whenever she gets paid which is lame and has waited months at times but I'm over it and know what I'm getting into) and 375 property owners. The contractor we work for is an odd set of circumstances that worked out. 2 of the property managers are "legacy" clients and it would be awkward to say "no". Its refreshing to avoid the rest of them. We work in a heavily managed area.

 

[Nine Banger]

PS: you're not going to get anywhere with interest arrangements. You can't fix these people.

 

[CJohnson]

It's hard to know all the details with your particular case, but I'll say this from a hard lesson learned:

Fire your bad customers. If you do good work, you'll find that there's people out there who appreciate it and will pay for it. Customers are a lot like employees - sometimes you have to cycle through a few to get the good ones and the bad one will always be bad ones. Every time I feel like I "need" a customer that doesn't pay, it never works out for my benefit.

If you have trouble having the conversation with the customer(s), hire a lawyer to write up a simple contract and make them sign it before you show up. Work towards your contract and nothing more/nothing less. I had trouble starting out because I wanted everyone to be happy when we finished the work. What I've realized is that there's some real miserable people out there and their misery has nothing to do with your price or quality. And, those are the ones to steer clear of.

 

[elkliver]

Just something to keep in mind... delayed payments are common. But when you get 78 plus days out, it can be a red flag of financial trouble. Someone robbing Peter to pay Paul. Also depending on the state you may risk delaying long enough you can no longer file a lien. In my opinion, 78 days is a problem and that is not a good client. Now they know they can get away with 78, why not try for 90.

You have to be flexible but you don't have to get taken advantage of