How do you make sure you get paid? Tell us about the most extreme measures you have taken to ensure prompt payment.
You have to stay on top of the contractors all the time. These past few years have been really bad!! As far as homeowners, if they don’t pay, we take them to small claims court. Everybody hates seeing the Sheriff’s Dept. show up to deliver a court order. We usually get the check within a few days.
—Giles Turgeon Wallingford, Vermont
The best way to get paid promptly is to know who you are working for. We like to know our clients, their estimators, project managers, but as importantly, their accounts payable people—by name. We find people pay their friends, even in hard times. Being a stranger makes it easy for them to not pay.
—Craig Daley, President, Daley’s Drywall & Taping, Inc., Campbell, CA
Never, ever give up lien rights or right to file a stop notice. This policy has served me well over my 35 years, and it can apply to retention. Because I stuck to this policy, I don’t have any unusual stories.
We have considered "borrowing” someone’s children, dressing them in rags and then having them "beg” for our money because they are hungry. This tactic may or may not work. Typically, the low man on the totem pole gets to float "no cost loans” to those higher up. Haven’t figured out a way around this one yet.
If I still worked at Marek Brothers Systems, Inc., in Dallas and I was having problems getting paid for our work, I would send AWCI President Tim Wies and his guys in the Mafia garb they wore during the AWCI Vegas brunch presentation!! I’m sure they would collect everything, including retainage!! :)
—Eddie McCormick, Executive Director, SCWCPA, Arlington, TX
Get progress payments for specific events of the project. If you don’t get a payment, stop your progress and hold up the job until you do get the one due. Be sure to have it in your contract that if this event happens, you do not need to proceed after getting the late payment. This way you can reconsider if you want to risk losing the other payments coming due and more time and materials on the job.
We hold on to the Certificate of Occupancy Release for our mall/retail work until we are paid in full. The new tenants are always ready to get moved in and open for business!
—Dan Fulton, Fulton Interior Systems, Evansville, IN
Give a discount if money is received on time.
Closed cell polyurethane sticks really well. One customer decided not to "pay upon completion.” The sight of 3 men attacking the foam with saws and chisels changed his mind ... or maybe it was the big pieces of foam flying through the air!!! P.S. We did not re-spray the area.
After months of trying to collect $30k I setup another meeting to try again. This time I brought an atlas and a phone book. When our client asked what they were for I held up the phone book and said, "This is so I can look up your grandma and grandpa.” Then I held up the atlas and said, "This is so I know where to go. Don’t make me have lunch with your grandparents and tell them what a piece of sh** businessman you have become.” He handed me his AMEX and asked to charge him in full.
There is never a guarantee. I put the payment terms in my contract, and they are fair. I insist on construction financing with either the bank or title company doing the disbursement, or an escrow account with both the customer and my company’s name on the account—and it must take both our signatures to remove any money, and the account cannot be closed without both parties signing off. So far this approach has worked for us for 20+ years.
Go directly to contractor’s bonding agent. If it is a homeowner, threaten to file a lien on home. Normal operating procedure.
San Ramon, CA
Dark sunglasses, long trench coat and a Louisville slugger work best.—
I file all notices / hound them after 30 days / personal visit / bug job super, office, project manager / notify building owner / lien if we have to / still get burned sometimes.
After 30 years in the business, [I’ve learned] there’s absolutely nothing you can do to expect to be paid on time. The GC will pay you when he wants to.
—Steve Birkeland, Artcraft Inc., La Crescent, MN
One builder owed me money for three jobs and wanted another so I waited until the day I was loading and told the guy in the truck to take the drywall back right in front of him. I told him the house (on a tight schedule) wasn’t getting stocked until his balance was in my hand. He wrote me a check right then and there, and I left to deposit it while the truck took off to load another house for me. I wonder if that job ever met its schedule …
We try to build a great relationship with the GCs. By doing this we know that they are on the same page with us. We also pursue jobs that have a greater guarantee for us to get paid such as negotiated, city, state and federal projects. Every project we do, we place a pre-lien, and if a GC gets too far behind we start to contact the owners directly. The owners don’t like to have liens on their property, so know when it gets this far, kiss that relationship good-bye.
—Chris Estrada, Metal Stud Specialist, Extreme Drywall Concepts, Glendale, AZ
I make them an offer they can’t refuse, which ultimately ends with having to threatening to sue them personally under article 3A of NYS Lien Law or use the NYS Prompt Pay Act, which provides for expedited binding arbitration. It’s not the if we get paid, it’s the when you ultimately get paid and the razor thin margins that you finance for up to a year that you hopefully don’t need any legal fees to collect.
We are pretty careful about to whom we extend credit and try to get deposits from customers that we haven’t worked with in the past. That being said, I have had two very memorable collection experiences over the 37 years I’ve been at this desk.
The first was a customer who offered to pay on the spot as we were completing the work. I told her that I would have to go back to the office and figure out the bill, then mail it to her and she could pay us by return mail. Well, she moved and we never did get paid for that one. From then on, if someone offers payment on the spot, we take it!
The second one was with an attorney who had owed us for a remodeling project and it was going on 90 days. I asked my attorney what I should do and he offered to call the customer, whom he knew, and see if there was a problem. He did. Ten minutes later, I was called and invited to the customer’s office, where I was paid and then called an "a-hole” for causing him to "lose face with his peers.” I told him I was sorry about his face and that, had I known how quick the results would be, I would’ve made the call two months earlier. Uff da!
—Roger Olson, Owner Sig Olson & Sons Plastering, Inc., Moorhead, MN
I have visited the contractor at his house early in the morning before he leaves for work, if dollars owed are past due and he will not return phone calls. This seems to work very well as it really gets his attention.
Unfortunately, this has become a bigger problem since the collapse of the economy. "Notice to Owner” documents are fairly effective in Florida, and I use them. They inform the owner that I worked on their property and that their contractor hired me for work. This legally establishes lien rights when administered properly. Most contractors are now operating on tighter budgets than the past. So, if the owner is slow paying, the contractor may be forced to be slow paying, and the subcontractor is likely to be the last to get paid. So far, I have always been paid, but when it takes too long, there is no reward for the work. I have had to discontinue work for some contractors that do not pay in a timely manner.
—Barry Barbas Glass Restoration Inc., Barbas Buildings and Designs, Inc., Sarasota, FL
Prompt payment would indicate getting paid within a reasonable amount of time from billing or completing your work. I believe we only take extreme measures when we keep hearing "Sorry no payment from owner yet.” I can’t blame the owner. The GC should be on top of their receivables. The most extreme measure I have ever taken is filing a "Notice of Non Payment” with the owner and copy the GC.
Well, being originally from the Northeast I would send my cousin "Quido” to the contractor’s office with a baseball bat … only kidding. In Florida there are lien laws that protect contractors as long as you file the proper paperwork when starting a project. You must file a "notice to owner” to the GC and the owner of the property when you start a project. If you don’t get paid you have 90 days from the last day you were on the job to file a lien on the project. Typically when you tell a GC you are going to lien a job, it puts pressure on them to pay. If not, the owner of the property is required by law to pay you even if he has already paid the GC.
—Michael Bossé, Vice President, Above All
Ceilings, Jacksonville, FL
J & B installed some glass at an insurance agency. After many excuses, I called again to ask for payment and when she said there was no one here to sign the check, I said I would be up to pick it up in 15 minutes. I sat for just a few minutes when lo and behold the secretary wrote out a check.
—Gerald Oates, Controller
Back a few years ago after completing a project for one of the major hotel chains we were called in to pick up our retention check of about $25,000. On arrival there was a group of subcontractors waiting in a room. Each was called in the room to get their checks, and each came out with a somber look on their face and left short-handed. The owner of our company at the time was called in for his turn. In the room was a rep from the GC’s office, the hotel chain and the accountant. Upon entering the room they announced that they were prepared to write a check for $12,500 and clear everything up. After a long silence our owner asked the hotel rep what he would say if he was to stay in his hotel for a long weekend and run up a bill of $10,000 and announce that he was prepared to pay $5,000 to even up everything. After a moment the rep turned to the bookkeeper and said, "WRITE HIM A CHECK FOR $25,000! NEXT!
—Pete Dittemore, President, Sierra Insulation Contractors Inc.
Normally if I am dealing with a slow pay contractor, I send a notice to the contractor as well as the owner and/or bonding company that I am pulling my crews from the job on a specific date if I don’t receive payment by that date. That will usually get their attention.
I have also had the situation where the general contractor filed bankruptcy on a project that was in the final stage of completion. I tried to do all the right things: filing my claim with the BK court against the GC, and dealing directly with the owner to finish the remaining 5% of the project. Unfortunately, the owner’s attorney had him complete the final 5% of the job with all new contractors (from landscape to mechanical), which, in turn, charged just over the amount left on my contract and retainage amount owed. I filed my mechanic’s lien with the county clerk for the amount I was owed and in turn I get a judgment filed against me for $268 from the owner for completion of my contract. After all was said and done by the BK court, I got less than .001% on the dollar. That situation put me out of business. I tried to do everything right. That was 6 years ago, I am still out over $65K and to this day I still refuse to pay the $268 judgment to the owner which is still in the county records and on my credit reports. I guess one day I’ll have to pony up. That’s the most extreme measure I had to go to and still didn’t get paid.