We did experience some problems collecting when starting out. Once we established the systems to make sure we got paid the chance of not getting paid when the last nail was driven became very remote.
To make sure you get paid the process starts with.
1. The sale when the salesperson explains how the company expects to get paid. Cash projects typically 1/3 with the order, 1/3 half completed and 1/3 upon substantial completion. The salesperson explains the Zero Punch List Policy.
2. Our second step was to send a congratulations letter to the new customer a few days after we were awarded the project. The letter welcomed them and was designed to reinforce proper expectations. It included the permit fee (we did not build that into the price, that is another story) and invoices for the middle and substantial completion payments (note substantially completed payment, not final payment, see below) and explained the owner would pay the project manger.
3. During the pre-construction meeting with the owner the payment schedule is discussed and the project Forman is prepared with additional copies of the invoices.
4. The project foreman explains to the owner when he expects to meet the payment stages so the owner is prepared for the payment. In fact, the owner often pays early if they won’t be around to make the payment at the end of the day.
5. When the last nail is driven the project foreman walks the owner through the Zero Punch List procedure and then collects the substantial completion or final payment. If there is a punch list item that can’t be fixed at the moment, maybe a broken item, the project foreman collects the substantial completion payment leaving behind an amount equal to the cost of the punch list item.
6. A “Key” to determining if there will be an easy or tough pay is how the owner handles paying for their building permit. If they take weeks to complete the process then they will probably be slow pay and red flags are up. If they do not make the middle payment on time…the project stops.
7. If there is a long delay or BS about the middle payment than upon receipt of that payment we then switched the contract terms from COD to CIA or cash in advance. Only had to do this a few times in 30 years and it saved a lot of heartache, because I had been burnt before I knew better. If the owner has the money and intends to pay they have no problem with CIA provided they don’t give it directly to us but to an escrow agent (could be their lawyer). Once we know the money is secure and we know exactly what is required to have the money released to us did we proceed.
8. I found it interesting that the more diligent we were at getting paid timely the better the relationship with the customer; we were awarded additional work and given more referrals. They respected our professionalism.
Just food for thought for never having to chase your money…Richard
We have only had one or two customers jerk us around. They usually had legitimate excuses, excuses non the less, so I let it slide for a couple of days. One other customer was a month and a half late. I got the check in the mail the same day I went to city hall to begin the lien process. Coincidence? I don't think so...
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