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Pay Subs After Customer Pays?

 
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Old 06-16-2011, 03:52 PM   #1
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Pay Subs After Customer Pays?


I am curious to know how many of you, or how common the practice is to pay your subs only after (and if) your customer pays you. My office gal placed a call to a GC today about an invoice from March. She was told "we will pay you when the end user pays us" My thoughts are that is a bunch of crap. Whenever I sub to someone I pay in 30 days. I consider that money the subs not mine and it is up to me to get them paid and keep them happy. I usually get on the phone and rant and rave (usually politely) about the bill and let the GC know that collection from the end user is their problem and they owe us the money.

BTW. Ous sub jobs are usually a few thousand dollars here and there. Its a GC that needs us to install locks or perhaps an alarm system. So I am not talking about a million dollar remodel. Perhaps it is an out of state company with a client in our state that needs $1000 in service work.
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Old 06-16-2011, 04:06 PM   #2
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Re: Pay Subs After Customer Pays?


I structure my payment schedule for the HO's in progression payments and I also pay my subs in progression payments... ie. When the plumber and / or electrician is finished th R/I They get paid for the R/I, and when they finish the trim out, they then get paid for the trim out.

I would never consider holding my subs pay until I get paid unless this was a pre-arranged agreement.

In the big picture the GC hires the subs and is responsible for paying them. The H/O hires the GC and is responsible for paying him.

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Old 06-16-2011, 04:16 PM   #3
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Re: Pay Subs After Customer Pays?


This is illegal in many places. It is commonly known as the 'paid when paid' and doesn't fly in my books,

What's in your contract?
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Old 06-16-2011, 04:26 PM   #4
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Re: Pay Subs After Customer Pays?


I pay may subs immediately following an approved inspection of their work, even if I haven't been paid by the customer yet.

I really only use gutter subs and by now I know they do great work so I usually just send a check the day after I get the invoice.

The I will pay you after I get paid crap just does not fly in my book.
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Old 06-16-2011, 04:26 PM   #5
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Re: Pay Subs After Customer Pays?


So if the customer never pays the GC, I gotta subsidize his poor business skills?

Three words:

No.
Freaking.
Way.

Let's say my work is perfecto. But the drywaller screws things up. Or the roofer. Or the plumber. Or the brickie. And the owner withholds payment. Why do I not get paid because of that?

If the GC is gonna play the Pay-When-Paid game, he's gonna find himself another electrician. I hear there's tons of starving sparkys on Craigslist.
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Old 06-16-2011, 05:00 PM   #6
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Re: Pay Subs After Customer Pays?


I think Pay IF/WHEN paid is a poor business practice but it is not uncommon. Many subs agree to it so they're stuck with it. If you don't have a contract or if your contract says due if/when paid you are pretty much out of luck.

Subs that will work for these terms are what create the problem. The crappy GC's are only in business because subs and suppliers will put up with them. The responsible GC's end up getting the short end of the stick.
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Old 06-16-2011, 05:09 PM   #7
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Re: Pay Subs After Customer Pays?


Pay when paid is not cool.

I wouldnt work for a loser.
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Old 06-16-2011, 05:23 PM   #8
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Re: Pay Subs After Customer Pays?


Subs were always paid upon or before the completion of their work.
The subs contracted with me, not the HO.
HO doesn't want to pay me it's my problem, not the sub.

I treated my subs very well and in return I was treated very well by them.
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Old 06-16-2011, 05:34 PM   #9
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Re: Pay Subs After Customer Pays?


Great to know I am not the only one that thinks this way. My terms are net 30 and when I get the story of "we will pay you when we get paid" I let the gc know that is not our terms. Of course trying to get them to pay can be a pain. But future jobs will be suspect and a lot of times kick these guys to the curb. I tell them to find someone else because I am not their financer. Or the other option, if I know they are good for the money, I will charge them more. If they ask for a discount I will ask them to pay with a check upon completion. They get a deal or terms... NOT both. That usually shuts them up.

A lot of my deals are without contracts. They are small jobs that we submit a quote, they hire us and we do the work. In those cases our terms apply and our terms our on our invoices.
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Old 06-16-2011, 05:45 PM   #10
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Re: Pay Subs After Customer Pays?


So here is a another question. We do have one GC that has a payment term saying they will pay all subs within 10 days of receipt of payment by owner. Is it okay to touch base with the owner to ask if payment was made to the GC and if not, when payment can be expected? How would you do this without ticking everyone off. My thought is that if we cannot get a decent answer from the GC about when they expect payment or if they are keeping up on the owner, then it would be okay to politely call the owner, inform them you are a sub, and ask for a status update on payment.
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Old 06-16-2011, 05:53 PM   #11
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Re: Pay Subs After Customer Pays?


I think the only people who do that are the ones that don't have the money to pay them out of their own pocket. I always like to pay right away. This way when the check does come the rest is mine.
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Old 06-16-2011, 05:54 PM   #12
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Re: Pay Subs After Customer Pays?


The sub has no control over the entire job, or the performance of the other subs. To hold back payment while other work is in progress is just wrong, and I'd find some new GC to work with, or get his terms changed.

If the GC decides to take a risky job, and doesn't get paid or paid right away, that's his problem. Not the subs.
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Old 06-16-2011, 05:55 PM   #13
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Re: Pay Subs After Customer Pays?


First, I would like to say I have been on both ends of pay when paid. The only time I can remember it on my end was a larger than normal contract and I told the subs and told them if we all wanted the work we had to work out these terms. That being said, I did reach into my pocket and pay them when I had an owner take 90 days when it was pay in 2 week past completion mile stones. 1991 and still owed money on that contract.

As far as your particular situation, I would insist upon payment terms that are favorable to you when you accept the work order. In other words, ask when they offer the work to you how they intend on paying.

Now as far as contacting owners, I would do so in your case when it becomes over due.
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Old 06-16-2011, 06:05 PM   #14
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Re: Pay Subs After Customer Pays?


First off before contacting the owner several things must be considered.

What is the amount owing? Couple hundred bucks, a thousand, few thousand, ten thousand, 100k

How big is your local market? Are there other GC's that will hire you? Let's be honest, this GC isn't exactly going to jump into doing more business with you when you call his client and tell them you haven't been paid.

It's a fine line you need to look at. I have 45 days to place a lien so around day 30 I follow up with the GC and if anything feels out if place or doesn't jive to well with me I'm ready to lien about day 37.

I would contact the owner just before a lien is placed just to see what's going on, I never imply I'm ready to lien until I feel I'm out of options. For that is the only time I go above the GC's head
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Old 06-17-2011, 08:18 AM   #15
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Re: Pay Subs After Customer Pays?


Your contract (implied if not written) is with the GC. You have no agreement with the HO. If you ask the HO if he's paid the GC, you're sticking yourself between them. Don't expect either to be pleased.
We don't use written subs' contracts either, but as GC I always think I owe the sub whether we're paid or not. Sometimes I have to let the sub know I won't have the cash until ***, but we try to schedule the payment schedule so we'll be able to pay subs.
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Old 06-17-2011, 10:26 AM   #16
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Re: Pay Subs After Customer Pays?


Always paid my subs the Friday after completion of each job - assuming each job passed my inspection. I started as a sub years ago and the above was the typical pay scenario. 10 days or when HO/cust gets paid doesn't fly, ain't right. Got to pay a man for a job well done - when it's done, not later.
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Old 06-17-2011, 10:41 AM   #17
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Re: Pay Subs After Customer Pays?


Real easy solution. Call the GC and tell them you will be filing a lien against the Homeowner the work was performed for if you're not paid by such and such a time. I can't imagine trying to work subs for those types of terms nor can I imagine subs working under those terms. But it happens all the time. Too many people hungry for work. To be a GC, one should have the financial wherewithal to handle the cash flow. If they can't, they shouldn't be a GC period.
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Old 06-17-2011, 02:47 PM   #18
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Re: Pay Subs After Customer Pays?


I always paid within 24 hours of completion for sub work. Of course as a GC, my contracts with h/o's always stipulated payment for each phase of construction was due prior to the start of that phase.

Life's so much easier when your working with the client's money...it's their home and I'm not a bank.
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Old 06-17-2011, 03:27 PM   #19
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Re: Pay Subs After Customer Pays?


that's the point. Too many GCs want you to help finance their project. Maybe because of their poor planning , or they just want to hold the money in their account.I've had a few do it to me, even though my contract- which they agreed to- states otherwise. Had to walk a couple of times to motivate them to pay.
Tired of those games. I'm not a bank. We no longer work for those who play this way.
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Old 06-17-2011, 03:44 PM   #20
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Re: Pay Subs After Customer Pays?


How about when the funds come from a bank loan? My state, all subs file on an online registry (prelein) and the banks issue the checks directly to the subs after inspection.

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