Getting paid ! Construction industry.

[Colterw]

I get what your saying and understand that's how the industry is. I just don't agree with it. I do have a question though. What happens if the project gets completed and the owner fails to pay the GC. Do they go out and borrow the money to pay all the subs? Or is it still a "you get paid when I get paid type of tning?"

Public works projects in my area require a performance and payment bond from the general contractor to ensure the project gets completed and the subcontractors get paid.

Should the GC fail to perform or goes bankrupt, the surety company will be liable to get the project completed and pay the subs.

The public agency will hold the bond until the project is complete, including affidavits of wages paid and closeout documents.

 

[Zach95]

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.

First, make sure payment terms are in the contract and be sure your contract is legal and enforceable. It's never a bad idea to have an attorney go over your standard contract. Second, know your state's lien laws and any laws governing interest fees. For example, my state (Oregon) has required lien rights notices that must be given with contracts to residential customers, and has a maximum interest we can charge. I give out required notices with every contract and charge 2% interest per month after payment is due. The invoice showing interest usually does the trick and I'll often waive the interest charge. If that doesn't work I'll send notices of intent to file a lien to the property owner. If working for a GC or property manager, the owner will usually get on it and get us paid pretty quick. I have never actually had to go beyond that and file a lien.

Don't hesitate to use every legal avenue to get paid in a timely manner, even with repeat customers. They expect you to perform, and if they can't pay on time in accordance with the executed contract then they are taking advantage of you being a nice guy. Do good work and perform your contractual obligations, and demand they do the same.

 

[OMF]

I don't have anything valuable to add as I don't do any of this type of work. But it sure is interesting reading! Wow, I had no idea this was generally "the process" in trades and other areas of business. It seems pretty crazy to me.

 

[Rich M]

Not to sound like an ass. But your post describes the gripe. The GC can't or isn't willing to bankroll their own job. But expect the subs to bankroll it for them. I don't see why the subs should have to wait on payment for work they have completed for the person that hired them. Shouldn't matter if the GC gets paid or not. No different than a sub contractor that has employees on that job site. I can guarantee you that they wouldn't stick around if their boss waited to pay them until the owner paid the GC then the GC payed the sub then he could pay his employees.

The whole pay-when-paid thing is here to stay. Just easier for larger companies to absorb the wait.

It is what we do cause it is what our clients do. They pay use when they get paid and then we pay the subs we used.

Cash flow is a horrible thing. One company is worried about shutting doors when owed $100,000 and another has $3.6 million out for payment. Both companies have same issue, just diff levels. Pick up the phone and make your contacts!

 

[Yoder]

I know a guy who was a little league coach for my son. He built a deck for a customer, and they didn't pay. There was no problem with it, they just wouldn't pay. He showed up to their house and hooked a tow chain up to the deck with his truck. He told them if they didn't give him the money he was going to take his lumber with him. He got his money.

 

[schmalzy]

The whole pay-when-paid thing is here to stay. Just easier for larger companies to absorb the wait.

It is what we do cause it is what our clients do. They pay use when they get paid and then we pay the subs we used.

Cash flow is a horrible thing. One company is worried about shutting doors when owed $100,000 and another has $3.6 million out for payment. Both companies have same issue, just diff levels. Pick up the phone and make your contacts!

Extremely frustrating part of owning a construction company. No employee would keep working for someone despite not getting paid for 30-90 days, yet that’s exactly what you have to do.


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[Rich M]

Extremely frustrating part of owning a construction company. No employee would keep working for someone despite not getting paid for 30-90 days, yet that’s exactly what you have to do.


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We are on the engineering side. Have a credit line for salaries and such. Shouldn't be doing that to employees, just contractors and they should be aware of it.

 

[TaperPin]

On flip side of slow pay is a guy like the remodeling dude I worked for in Boise. His super hero skill was scheduling, contracts, and working with his favorite subs. At the beginning of the job, every little detail was finalized with the client and subs had a very specific start and completion date, or they would be replaced and back charged. During the time allocated, subs had to have at least two people on site 8 hrs a day or get fined $200/day. Subs agreed to these very strict conditions because as soon as they were done, we would walk through, inspect their work and cut a check on the spot. This caused the project to be completed so quickly the clients had little time to second guess, question, or change their minds. Change orders were very expensive for the client just to cut down on interruptions.

The difference in problems with the clients or subs compared to an “average” remodeler was night and day.

 

[schmalzy]

We are on the engineering side. Have a credit line for salaries and such. Shouldn't be doing that to employees, just contractors and they should be aware of it.

Just to clarify, I meant that we pay our employees no matter what, regardless of if we get paid by the GC.

LOCs are extremely tough to get as a contractor unless you have a significant business history and collateral. Just recently discovered Amex business LOC that was all personal credit driven and backed by linking your business checking. Highly recommend.


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[Rich M]

Just to clarify, I meant that we pay our employees no matter what, regardless of if we get paid by the GC.

LOCs are extremely tough to get as a contractor unless you have a significant business history and collateral. Just recently discovered Amex business LOC that was all personal credit driven and backed by linking your business checking. Highly recommend.


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I wasn't meaning to imply anything. Sorry if I did.

Our LOC is thru a bank and tied to top 2 owners. I'm not tied into that.

 

[Dogone]

My story is only relavent because this is a hunting forum. I am an outfitter. A booking agent sent clients one year an everything went well. The next year was a late booking so no deposit but no problem I thought.
His check for many thousand’s bounced . He bullshitted me along for six months. The I called a collection agent in the state and country he was in. Took six years but got my money plus costs and interest. Never give up.

 

[H@mstar19x3]

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

Good contracts make good business partners.