There are a lot of things to consider when agreeing to payment terms with a customer. One factor to contemplate is when your suppliers will expect payment. So, a subcontractor must both consider their customer's expectations and their supplier's expectations when deciding on what payment terms to accept from a customer.
One way to tie a supplier's terms to your own receipt of payment would be to include a pay when paid provision in the supply contract. Granted, a supplier might not always be amenable to those terms. Plus New York pay when paid clauses have their limits.
Another option may be to try and negotiate with a customer so they might pass some payment through upfront in order to pay for the materials needed at the start of the job. While a customer won't always be willing to work with their subcontractor there, offering to utilize joint checks to ensure the supplier is paid may provide some peace of mind to a wary customer.
Bottom line
Unfortunately, subcontractors commonly have to float the costs of construction since they regularly have to pay employees and even suppliers before they, themselves, receive payment. Ultimately, the best way to make sure a project's payment schedule is fair is to openly and honestly communicate with the other parties on the job.
Discussing payment terms with a customer as well as the supplier and working together to identify a solution could help to ensure everyone's on the same page regarding payment and to be sure that everyone's paid fairly. And, where possible, a supplier may be able to include a pay when paid clause with their supplier so that payment won't be required until payment is received.
For further discussion on slow payment:
- Why Does it Take So Long to Get Paid in Construction? And What Can I Do About It?- Webinar: Slow Pay? No Way! 3 Simple Tips to Getting Paid Faster
The information presented here is not legal advice and should not be construed as such. Rather, this content is provided for informational purposes. Do not act on this information as if it is advice. Further, this post does not create any attorney-client relationship. If you do need legal advice, seek the helSee More...See More...