Payment for completed projects

Evelyn Martina

Hi

My partner and I are in our third year of business. It is a flooring business mainly resin and epoxy flooring and coatings. Lately we have been doing a lot of work with a contractor within bigger companies, however he seems to ignore our terms and conditions that clearly state payment on completion of project or at least 7 days thereafter, deposit for bigger projects. As we are a small operation delay in payments can really upset our cash flow seeming as we carry the wages bill, product etc. When we ask for payment we are told "you will be paid when I get paid". Surely this is not ok, how do we reply to this, what can we do? We are now owed quite a substantial amount of money, what is the norm? normally we have no problem in getting paid and generally get paid immediately or relatively soon after completion of job. I don't see why we should have to wait for payment when the job is completed and everyone is happy with the quality of work. Any help advice greatly appreciated.

Speedwell

Did he sign a contract that clearly stated when payment was due? Then he is bound by that contract. If he openly and egregiously breaks the contract, then contract law is almost certainly on your side (I'm not a solicitor, but that is what contracts are for). His cash flow should not be your problem. He doesn't go out to eat and then tell the server, "I'll pay you when I get paid", does he?

Evelyn Martina

No he did not sign a contract, we send in a quotation with a copy of our terms and conditions, we ask that we receive a signed acceptance letter or form, however he ignores this. We have gotten work in quite well known large companies with him, but legally we are not very well covered and he refuses to sign contracts etc. When the job is completed he always haggles the price and tries to bring it down and then tells us we will get paid when he gets paid, there is so much uncertainty. He is quite well known a contractor and works in very well known large companies in Ireland, so we are not sure what to do without rocking the boat too much, but he has caused us a lot of stress etc due to quite late payment of our invoices and these are generally for large amounts. My sister in law is a Solicitor and is drawing up new contracts and terms and conditions. Sometimes I wonder why we bothered starting our own business it can be so stressful. We can often be tied up for most of the week working for this contractor therefore we are not working anywhere else to if does not pay us there is no money coming in.

Graham

You have a few options:

1) accept the work on his terms
2) decline any future work until the outstanding amounts have been settled and new terms agreed.
3) push this customer down your priority list. Schedule work from better paying customers above his.
4) Don't start any new jobs until you have confirmation of an agreed price and/or a deposit

Option 2 has a couple of potential downsides, not least of which is being left hanging for the previous payments. Have you tried having a conversation with the customer explaining you won't be in a position to fund any future work unless/until the payment issues are addressed?

How likely is it this customer could find someone to replace you at short notice?

pedroeibar1

Evelyn Martina wrote: »

No he did not sign a contract, .......When the job is completed he always haggles the price and tries to bring it down and then tells us we will get paid when he gets paid, ....... My sister in law is a Solicitor and is drawing up new contracts and terms and conditions.

You are in the classic sub-contractor to a sub-contractor position. Graham has given on-the -money advice above, I would add that you really need to put a proper credit control procedure in place, as right now youhave nothing. Insist on proper contracts/terms of sale, ensure that you have them on your delivery dockets and invoices (printed on the reverse). Ask your solicitor sis-in-law to explain "Pay-when-paid" and "pay-when -certified" to you. You are providing a very specific product and service, so your position might be stronger than you think. Ask around (e.g. with friendly architects/engineers) find out what competitors are doing.
Right now you are being taken for a complete ride. You need to put procedures in place to ensure it stops and you take control of your business - otherwise you will be history.

duploelabs

In a former life, I used to design and project manage AV contracts/installations so had to deal exclusively with construction companies. We used to enforce a 40/40/20 split payment schedule on problem clients like those. 40% on point of order (If they disagree then just say that you've materials to buy), 40% on commencement of work ("I've labour bills to pay") and then the remainder 20% on sign off by the consultant engineer/Architect as per their specification for the job (make sure it's the engineer who's independent rather than them). Perhaps float that out on the next job they look for from you as your payment terms, means they've already committed to paying you from the first moment of order rather than giving you the fob off 6 weeks after the job completion

the_pen_turner

how about offering a discount for immediate payment. obviously added to the quote at the start

sconhome

Evelyn Martina wrote: »

Hi

My partner and I are in our third year of business. It is a flooring business mainly resin and epoxy flooring and coatings. Lately we have been doing a lot of work with a contractor within bigger companies, however he seems to ignore our terms and conditions that clearly state payment on completion of project or at least 7 days thereafter, deposit for bigger projects. As we are a small operation delay in payments can really upset our cash flow seeming as we carry the wages bill, product etc. When we ask for payment we are told "you will be paid when I get paid". Surely this is not ok, how do we reply to this, what can we do? We are now owed quite a substantial amount of money, what is the norm? normally we have no problem in getting paid and generally get paid immediately or relatively soon after completion of job. I don't see why we should have to wait for payment when the job is completed and everyone is happy with the quality of work. Any help advice greatly appreciated.

You really need to get on top of this right now.

This is a classic move from a contractor which can only result in one thing, you being over burdened, underpaid and going out of business.

To win contracts you are already on a tight price line, no matter how specialised you are there is always some other price you have had to beat to get the job, so margins are tight.

Contractors promise sun moon & stars to get you on site and going. Once you are committed both time and materials they 'own' you and any move to change or enforce terms and conditions can lead to you being cold shouldered with no further work and outstanding payments that always seem to be at the bottom of the monthly pile. You can chase this for years and get nowhere.

You need a full and frank discussion with the contractor about your payment terms. Don't make it an ultimatum conversation, you just want it cleared up. You are not a bank and it is not right for them to use you as a crutch to their cash flow.

Speak to other subbies on the QT and see how they are getting paid.

Best of luck with it and hope you get resolved AND paid!!

dudara

We sometime engage sub-contractors to work for us, but the terms of payment from us to them are always spelled out quite clearly in the contract or statement of work. I wouldn't dream of engaging, or being engaged without a signature on paper and a clear understanding.

There's some really good advice in this thread, my recommendation would be to take some of it

dbran

Hi

Some really good advise here which I hope you find helpful.

Getting paid is by far the most important part of any business. If you are doing work and you are not getting paid then why the heck are you doing the work in the first place.

At the end of the day, if he wants the service from you then he has to pay. Otherwise you need to let move him on and let him leach off the next person.

Your time and your business would be better spent getting other paying work rather the dealing with the stress.

I also would not fall into the trap of doing more work for someone solely because they already owe you money, or particular contacts that they have etc especially if I am afraid I wont get paid anyway. You never ever throw good money after bad.

Thus you need to access the situation clinically, make a decision as to whether you are can do business with this guy. If you decide that you can manage them, then take the appropriate action going forward. This means implementing appropriate credit control procedures, staged payment arrangements etc so that you take back control over your cashflow and thus your business. If you feel this is not going to be possible then you cut your losses and stop working for them.

Hope this helps

dbran

Evelyn Martina

Thanks so much for all the advice above, we are currently having a procedure put in place and documents drafted. We have spoken to the contractor and have stated that we will not be starting anymore work until we are paid and have informed him of our new procedure, he seemed to take it on board so we are hoping going forward that things will run more smoothly.

thanks.