Ever wondered how to get paid faster on a particular job or how bad debt could be significantly reduced and even avoided entirely? Over the past 10 years, we have spoken to literally thousands of people in the construction business, folks just like you. From that wealth of experience, we’d like to share a few tips that we’ve learned that might help you get paid faster and build better professional relationships with your customers.
Use a Stronger Contract
Some contractors and suppliers that normally work with the same, repeat customers may want to expand or grow their customer base. However, one missed payment could be the difference between your business making and losing money.
If possible, it’s a good idea to get some portion of the contract value up front as leverage in case of non-payment. This might at least provide funds to break even and pay labor and material costs while filing a claim to recover additional losses.
Construction Contracts – Beware of Certain Clauses | by levelset‘s Chief Legal Officer Nate Budde
Implement a Notice & Lien Policy
As an added security measure, sending preliminary notices at the beginning of the job informs all parties of your company’s presence on the project, and the work you’re going to perform. Thereafter, a notice of intent warns the highest parties that payment needs to be made in order to avoid a mechanics lien to secure the debt.
By implementing a methodology to get paid faster, small business owners can better understand how individual accounts age and what action to take when unpaid. This will also help in writing off less bad debt on a project and taking a significant blow to the bottom line of revenue.
Send Progress Invoices Regularly and On-Time, and Include a Conditional Lien Waiver With Each Invoice
By sending updated invoices with conditional lien waivers, the lower-tiered parties on a project essentially remove a step in the payment process by willingly allowing for the waiving of lien rights for payment. This best practice promotes dialogue and strengthens the relationships on a particular job as well as moving forward on any future projects.
The Result? Get Paid Faster and In Full
Who doesn’t want to get paid faster on a job? The above practices would allow business to focus on other tasks and keep the company moving forward. As the following testimony states, those who send notices and actively monitor invoices get paid faster on projects.