August 2009How are you handling collections these days? Because of the economy, are you allowing a little more time to receive what’s due to you because you "understand,” or are you even more forceful about getting paid on time? Please explain.
Pay is horrible. Work done, punch done, building occupied and making money for the owner, owner goes on vacation, change orders not signed, owner hasn’t paid general contractor so subs don’t get paid, lien rights expire before change orders are processed and negotiated, last requisition gets cut.
Formerly 30-60 day pay has become 90-120 days or longer—sometimes much longer.
We are tightening up considerably—no change order, no work—start calling on money the day after it was due, nag ’em, don’t let lien rights expire.
Talk to suppliers about better pricing and better terms. Shop everything—materials, insurance, scaffold, everything.
Expand scope to improve possibility of having cash flow, but stay within limits—same skill set, different material, for instance.
—Rob Aird, President, Robert A. Aird, Inc., Frederick, Maryland
Calling more often and gently shaking the tree works the best.
Right now you try to be understanding, but it is difficult when most of your subcontractors instantly turn around and threaten you with a lien if you don’t pay them immediately. I work with larger clients, and if I did that I would never be allowed to work for them again so, I have to be a bit patient. The smaller clients I am almost forced to be a little tougher on because I found that a lot of them will lie right to you, and the next thing you know they are either out of business or we are caught up in paying legal expenses that end up costing us money. Basically you are in a no-win situation, because the court will never award you reimbursement of your legal fees!
We’re being more understanding except in cases where party in question lies and/or does not return repeated phone calls. Then the hammer comes down.
—Shelley Degroot, Talsma Companies
How can you collect any money if you don’t have any work to be billed??? The only thing to understand right now is that if our economy continues the way it is right now, a lot of us will go out of business, period!!! Understand that!!!
Very difficult, have to allow a lot of time there for the bank.
Well now I don’t really ever remember getting paid on time, there is usually some kind glitch that holds payment up. Nowadays it’s like a gamble if you even get paid at all. Fortunately fortune has us in the "EIFS world” meaning when it comes to getting paid we are on the other side of that BIG NASTY BEAST called "EIFS insurance.” It works like this: We have extended warranties and EIFS insurance and you have our money, and we want to make a trade when the job is done. So far nobody has wanted to sit alone in that hot seat. We still have to wait and listen to all the excuses about why the payments are not here, but at least they know that we have a very legitimate bargaining chip.
—Jeff Muller, Vice President, M&O Exterior Applicators, Inc., Frederick, Maryland
We tried the "nice” approach only to realize that the companies were using it as a continued excuse not to pay and/or we waited too long to put a mechanic’s lien on the project. Now, we contact our customer’s accounting department at 15 days to ensure that everything is okay with the invoice. At 35 days we make contact again, and at 45 days we file a Notice of Intent to Lien protecting our rights if the contractor goes belly up. We find that once they or their client’s receive the notice, they pay right away.
Be as aggressive as possible, file all your paperwork, and do not let your lien rights expire.
Credit is a privilege, not a requirement that you are extending. Why should you not be paid on time, unless you made other arrangements with your customers? When you give the service, you should be paid promptly as agreed. You are not their banker unless you choose to be!! What is wrong with being forceful? It is your $$$. ... Your cash flow is how you survive or die in business. You all know that!!
— "Laddy” Dale, Dale Enterprises Inc., Grand Junction, Colorado
Liens on property, small claims court lawyers
Understanding your customers and their payment trends is the key to working on past due accounts. Some you give leeway to and others you must tighten your stance.