Maintaining regular cash flow is necessary for running small businesses successfully. And if the business is that of a concrete contractor, it becomes all the more critical. Concrete contractors need cash to pay their suppliers and subcontractors.
Picture this: If the suppliers are not paid on time, they stop extending flexibility in payments and might ask for the entire payment upfront. If the subcontractors are not paid on time, they may stop work, leading to overall project delays. In both cases, a concrete contractor stands to lose money and reputation.
Naturally, delayed payments from clients are some of the most pressing problems of concrete contractors. On the other end of the spectrum, clients will have several reasons to delay payments, ranging from lack of funds to dissatisfaction with the work completed.
Irrespective of a client’s logic, the fact is that many concrete contractors can do a much better job of getting paid.
If you are a concrete contractor who struggles to get paid on time, this article is for you. Read on for a few tips that should help you secure timely payments.
1. Create a detailed, strong contract
Contractors must create firm contracts that protect their interests yet are fair to the clients. The keyword is clarity. Contract terms must never be open to interpretations.
A firm contract should be clear and specific about all terms and conditions. You have important questions to ask beforehand, including:
- How much will you get paid?
- When will you get paid?
- Is it all in one go or at different milestones?
- Are there any penalties for late payment?
- What happens if the payment is not received?
Additionally, follow the practice of calling out the key terms before starting the job. If you have subcontractors doing the job for you, train them on discussing payment terms with customers.
2. Create a robust invoicing system
Let’s assume that you have completed one of the milestones set out in the contract. Then, will the client make a payment without you asking for it? Mostly, NO.
The client expects an invoice against which they can make a payment. If you don’t already have a robust invoicing system in place, this is the right time to invest your time and effort in one.
Figure out the information that needs to go into your invoice. A healthy invoice provides the following information:
- invoice number
- date
- client’s name
- breakdown of cost in terms of materials and labor, quantity, unit, price, totals, and tax amounts
- addresses
- phone numbers
- branding of your business
Next, figure out the number of days within which customers should make the payment.
Work out your mode of delivery (hand-delivered, emailed, mailed, others) and the timing of sending your invoices. You should always submit your invoices on time.
Last, step away from traditional ways of invoicing with pen and paper. Go for automated methods and minimize the possibility of inaccuracies. Did you know that one of the biggest reasons for nonpayments from clients is inaccurate invoices? Now you know!
3. Act swiftly on nonpayments
Repeat this sentence, “Late payments are not acceptable.” And this is not just something to remember; it’s a mindset shift.
Often, contractors don’t chase pending payments as well as they should. They often ‘hope’ to receive compensation. Sometimes, they continue working for the same client, hoping to receive payments at some point in time. In the process, they further increase the amount of receivable. That’s a bad practice.
Contractors must chase pending payments right from the time they become overdue. The moment a client defaults on their payment, contractors must send reminders and notices.
One of the best practices is to engage the client. Ask them the reason for the nonpayment. Who knows, it may be a simple thing such as losing the receipt? So, find out what you can do. Also, note that sometimes customers just forget. Find out what’s wrong.
If it’s something else such as a shortage of funds, talk to the client to figure out a way to create a win-win situation. Perhaps offer them a payment structure that meets their requirements.
4. Consider legal options
Concrete contractors have a few legal options at their disposal.
Contractors can send a preliminary notice at the start of a project. In states where this notice is required, it secures construction professionals’ right to file a mechanics lien in case a payment dispute occurs. It also opens communication lines between them and property owners.
They can then file a mechanics lien when indeed payment has not been settled. This document gives contractors a legal claim on a property because of the unpaid work done. It has been observed that liens often do the trick; they are pretty handy when recovering payments.
What if the client still does not pay? Well, the next option is to file a suit. Nobody likes to get entangled in unnecessary lawsuits. Not the customer, neither do you. So, use your legal options wisely.
Don’t ever hurry into legal action. Consider if the pending payment is worth all the hassles involved in taking the legal route. You might as well use that time and energy on new clients.
Conclusion
Sometimes, industries are riddled with bad practices. The concrete works industry faces one such practice — clients delay payments. As a result, concrete contractors face the brunt.
Unfortunately, late payments have been known to cause significant disruptions to contractors’ life, even bankruptcy.
So, do not sit back. Get up and do what you can to get your payments on time. Begin with setting up a strong contract and a perfect invoicing system. Always be mindful that the longer an invoice is unpaid, the more difficult it gets to receive payments. So, be assertive and ask for the pending payments the moment they become overdue.
Most importantly, focus on providing excellent service. Customers who are happy with the service are much likely to pay on time.
And if you are still waiting for payment after doing all the hard work, don’t get disheartened. You got unlucky. Nobody should have to wait to get paid once the work is completed as per the agreed terms.
About the Author:
Patrick Hogan is the CEO of Handle.com, where they build software that helps contractors, subcontractors, and material suppliers with late payments. Handle.com also provides funding for construction businesses in the form of invoice factoring, material supply trade credit, and mechanics lien purchasing.