The Road to Getting Paid on Time for Residential Construction Contractors
Business Tips
3 min read
Share
According to a 2019 report, which surveyed 184 general contractors and subcontractors across the United States, slow payments cost the construction renovation, remodel and restoration industry over $64 billion (!) last year. 43% of the respondents said that they have to wait between 30 and 60 days for their payment. For another 30%, this figure rises to more than 60 days. Yes, the industry is notoriously tricky in the invoice paying department, no news there. Getting paid as a residential contractor can be a headache and, as we all know, not getting paid on time wreaks havoc on your cash flow, in times of Covid-19 now more so than ever. However, sticking to a few key rules that revolve around communication, documentation and making use of the legal safeguards available can go a long way in ensuring that late payments are the exception and not the rule.
Getting paid as a contractor: Put everything in writing
Client management is key: Never fail to communicate
Consider flexible payment options
Use legal provisions that protect your right to get paid
The law provides for various tools and safeguards to ensure contractors getting paid. Use them. Integrating late payment fees in your contract is a minimum and putting such fees in your contract is not to be underestimated as an incentive for clients to not be late with contractor payment. Wherever you are in the US, your state will have statutes in place that protect contractors from not getting paid. One of the most important ones is the so-called mechanics lien law, which gives construction companies the right to file a mechanics lien in case of non-payment. It enables the contractor to hold a claim in the property which is subject to a home improvement project. To set off this lien process, contractors need to send a preliminary notice, as a general precaution and before problems arise. In some states, this is actually required by law but even if not, it might be worth considering in order to reduce payment problems.
Read how: Remote contractor teams collaborate virtually in 2021 to execute projects in a COVID-safe way
In summary, the road to getting paid on time to protect your cash flow is a mix of following very clear processes around payment conditions and invoicing, making use of legal safeguards, applying soft skills throughout and using the right software: Communicate, be prepared to approach your clients openly whenever any payment issues arise and use your common sense. Resorting to legal means to force payment and ending up in court with a client is the worst-case scenario that everyone in the business would want to avoid. However, even if you have a well-established payment process in place, there can never be a 100% guarantee and things could always go wrong. Nevertheless, adhering to the key factors described will put you on a solid base to successfully manage how you get paid.
You’ll enjoy access to the full range of features and can use the app to manage your next two projects from start to finish. Learn how your renovation, restoration or remodeling business can benefit.
