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Getting Paid—On Time

While collecting payment is usually the last part of the project, and while the main emphasis is on doing a great job, late or non-payment of money due can make it difficult to operate and add unneeded stress.

We asked contractor members of the Association of the Wall and Ceiling Industry about the payment climate in their part of the world and the actions they take to make sure their invoices are routinely paid on time. What do they do when there are delays? Unfortunately, or fortunately, we received many more replies than we have space to print, but we will try to squeeze in the best advice—and the humor.

The Current Payment Climate

First we asked about their company’s current state of accounts receivable.


Eileen Kinnear, accounts receivable manager for Heartland in Iowa, says, “The majority of invoices are being paid on time. Some are delayed due to the timing of when we invoice the general contractor and then when the general contractor invoices the owner for payment.”


“The status of our receivables is about normal for this time of the year,” says Dan White, CFO at the Gallegos Corporation in Colorado. “We always have a certain number of customers who delay payment, and at this time of year it always seems to be a little worse than at other times.”


In Hawaii, Mike Mazzone, principal at Statewide General Contracting & Construction, Inc., says, “Our problem is collecting our retention payments. The difficult part of retention is the timing of sending the final invoice. If we send it too early, it sits on our AP and doesn’t look good to the bank. If we wait for the general contractor or owner to tell us to bill, it also looks bad as an open job on our books.”


Mazzone’s accounts payable manager, Jennifer Kennedy, adds, “Most of our accounts receivables are paid within the 90-day period so we have a constant cash flow every month to cover the bills we need to pay. During COVID-19 we relied on PPP loans and our revolving line of credit if we needed to tap into this.”


Christine Luizzia-McGuire, president of Golden Crown Contractors, Inc., in New Jersey, reports, “We have seen an unusual delay in our accounts receivable, which are 60 to 90 days as opposed to the normal 30 to 45 days.”


Ron Karp, principal at Advanced Masonry Systems in Florida, says, “Generally we are seeing delays in payments. The biggest disconnect I see in our industry is between operations and accounting. While the demands of operations take the approach that ‘time is of the essence—go, go, go,’ accounting appears to take the approach, ‘We’ll get to it when we can.’”


But Steve Winn, director of credit at Marek Brothers in Houston, Texas, says, “Sure there are those customers whose knees you need to visit with a Louisville Slugger, but they are very few. Most customers want to pay and have great people in their AP departments who are just as passionate about their jobs as we credit-and-collections people are about ours.”


Good news from Bill Fritz, president of Mission Interiors Contracting, LLC, in Texas. He says, “Receivables are all up-to-date, all being received within terms.”


Rick Wagner, senior project manager at Richard Wagner Enterprises LLC, says, “We try to stay with customers who we know are consistent, on-time payers. However, in the last six months we have seen a slow trend toward extending out right to the due dates. One mega company is having internal accounting issues, causing great concern to many of us trade partners.”


“It looks like our receivables are normal for this time of the year,” reports Gilly Turgeon, president of Green Mountain Drywall Co. in Vermont. “They are a little slower than usual but that is to be expected with everything going on in the world.”


Adam Barbee, senior estimator/project manager at Daley’s Drywall in California, says, “When you’re doing repeat business in the same area for decades, you build strong relationships with reputable clients. This creates a bond of trust, built on success. Working with those clients is a huge benefit when it comes to getting paid on time.”

Best Routine Practices

What are the general, routine actions that ensure timely payment?


Kinnear says, “Constant reviewing of accounts, and communication with the general contractor are key to ensuring the general contractor has everything needed to bill the owner.”


“We contact our customers when their invoices hit the 60-days mark with a courtesy call, just to make sure they received our invoice and that it is in the process of being paid,” says White. “We ask them to give us a date by when the invoice will be paid. I review our receivables weekly, check the notes and follow up with my staff on any questions I might have. If our staff are not getting answers, or having difficulty with a customer, they escalate it to me to call. If the situation dictates, we sometimes also use our project managers to help collect.”


Kennedy says, “I look at accounts receivables every couple of weeks to ensure we are staying within the 60- to 90-day pay period. I keep a log of the clients I contact, and usually I do this through email to ensure that when they promise to pay, I can reply to that email and ask them where our payment is if they are late. I have tools to forecast our expenses for 12 weeks out to know exactly what will be going out and what I project coming in. Our payables are always paid within 30 days, and we never fall behind unless we are waiting to receive our payment from the general before we pay a subcontractor.”


“Good collection results start with good billing practices,” says Winn. “Improper billing, whether it’s overstating completion, incomplete documentation, wrong forms, missing forms, missing the deadline or even sending it to the wrong place are far more common causes of slow payment than the 15-20% of customers who are true slow payers. We review the contract for the billing procedures and communicate that to our [accountants] who, I have to say at Marek, do an excellent job of understanding the contractual requirements.”


Shawn Burnum, AWCI’s president and vice president of operations at Performance Contracting, Inc., in Kansas, provides detailed insight into the routine at his company:


“It really starts with project and client selection before you ever decide to bid. We stay away from a few owners or GCs who have a history of non-payment or delayed payment.


“At contract, we ask for a partial retention release at certain completion points in a project. They may say ‘No’ but they may also agree to do something.


“As we process our monthly billings, we try to submit our schedule of values beforehand or early and try to obtain approval before the processing date. This allows us to work through any issues while still ensuring they will be included in the pay application to the owner.


“We have our billing administrators network and develop relationships with their counterparts at our typical clients. People will pay friends first, so spend a little time and money developing or fostering these relationships.


“Don’t be shy about asking for your money and getting status reports. Our clients are not usually shy about their needs during construction, so there is no need to be shy about getting paid.


“Make a deal if there is a deal to be made. Don’t lose sight of the impact of change-order delays on your payment. As you wrap up a project and there are requests for special favors, remember to include payment in those discussions.


“It is a team effort. We talk about collections in our weekly meetings with our estimators and operations team, who help our administrators if they need an extra push with a difficult client. If collections continue to stall, company leadership will escalate it to the next level.


“We protect our lien rights when applicable.”


Fritz says, “Payments are the lifeline of your business: Invoice on a continuous basis with strict terms.


“Send out routine monthly statements.


“Any client exceeding terms will have a noted statement with an intent to lien date beside their invoice.


“Make a direct phone call to the owner if the payment is not received two days before intents go out. All parties including GC, owner and banking institution receive the notice of intent.”


“We always ask for a response from customers that they have received our package as an on-time billing, then follow up to confirm that we are in the queue for on-time payment. If the due date is missed, we start the emails and calls all over,” says Wagner.


Turgeon says his routine is to “just look at my reports every Friday afternoon. If anything is more than 45 days out, I send a notice.”


And for slow or late payers?


“Pick up the phone and call your customer!” advises Luizzia-McGuire. “It is best to have a conversation, as sometimes the delays can be understood better.”


“The written contract is key, and the foundation of due payment,” says Barbee. “It sets the ground rules. If our clients are late, our team will constantly check in with them until payment is received. We’ll keep knocking.”


“If the invoice is not paid when it is due, we send a gentle reminder that we have not received payment,” says Kinnear. “If no response, a follow-up phone call is recommended. Usually, payment has not been sent out because the general contractor is waiting on payment from the owner. Lien rights can be filed for nonpayment within 90 days from when materials were delivered or when the last substantial day work was performed. It’s essential to ensure lien rights do not expire.”


Karp confirms: “Communication is always the first step. But when that doesn’t produce results, the threat of a notice of nonpayment and/or a claim of lien generally gets their attention. Providing these documents in draft form to the client has an impact. This should be done only after several attempts at communicating have failed to achieve any result.”


White says, “Utilizing lien procedures is the most effective method we have of collecting severely late payments. If a job is in progress, we can also leverage pulling our labor forces off the job until payments are caught up.”


“If a project has a bond, we collect all the bond information up front before signing the contract,” says Mazzone. “When we submit our 100% progress invoice we also notify the bonding company of the open balance, including retention. This extends our window to attach the bond if we are not paid. For other jobs, we use property liens as much as possible.”


Fritz advises, “Learn to be firm when speaking of past-due invoices. After all, they did not beg you to come do the work, why should you have to beg for your money?”


Turgeon says, “If I file a small-claims court date and the sheriff shows up at the guy’s business, that really seems to get their attention.”


The prize for the most ingenious tactic goes to Wagner: “My dad, who was a masonry contractor, told me early on, if you have a slow- or no-pay GC, take your smelliest laborer at lunchtime on Friday to their office and have a sack lunch in their lobby until you get a check. I’ve done it twice over 40 years of contracting and it worked both times: once with no problem, and once with the GC calling the law on us. But the lawman sided with us and said, ‘Carry on,’ and I got my money!”

David C Phillips, a freelance writer and photographer, is an original founding partner at Words & Images.

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