Builders, Three Must Haves In Your Building Contracts To Get Paid Every Time

Building Agreements - Three Things To Include In Your Building Contracts To Get Paid

“Will I ever get paid?!”  

So, your building client has quit paying you! And you stand to lose thousands!  Believe it or not, this issue is more common than you think. Non-paying clients make the life of small builders exasperating - regardless of the economic climate.Most builders have a story to tell of a “bad paying client.” It starts out as a dream job – large, challenging and profitable. But it turns sour when your client questions every single invoice item, argues over your margins and refuses to pay for some things. Your overdraft is growing and you fear receivership.

But it doesn’t have to be like this …if you set-up your building agreements carefully.In this article, I outline three things you must have in your building agreements to help make non-paying clients history.

1 Clearly state Invoices Due Date on Building Quotes

Are your payment terms clear? Your invoicing arrangements and payment expectations should be set out clearly.If your normal process is weekly invoicing for all costs incurred in the preceding week, then make sure your agreement specifies this. Include how the invoice will be delivered and when payment is due.

How To Do It:

“Weekly invoices will be created at the end of each week (normally a Friday) and emailed by close of business.  Invoices will include labour, materials and subcontractor costs incurred in the seven days up to and including the invoice day.  Payment is made by direct deposit within 3 calendar days.”

2 Building Contracts Should State Your Right To Stop Work

It is your right to stop work if a progress payment is not made on time.  While this is a huge interruption to your work schedule, it is much less disruptive than not being paid!  So be sure to include it in your building contracts.

How To Do It:

“Should invoices not be paid by the due time, work on your project will halt.”

3 Include Recoverable Collections Clause For Outstanding Debts in Building Agreements

Make sure you state that if debt recovery becomes necessary, any costs incurred will be added to the outstanding payments.

How To Do It:

“We reserve the right to charge overdue fees, interest (at x%) and collection costs on all accounts not paid by their due date”.

A Final Word - Be Polite

In any conversation with clients it is most important that you stay in control. Don’t allow yourself to get angry. Remain respectful and calm. If you are tempted to lose your cool, email rather than phone – but read your email several times to make sure your tone is friendly.

Take Away

While most standard building association agreements are excellent, they may need adjustment to suit your particular payment terms.  So, having your lawyer check these is a very worthwhile investment and may save you thousands of dollars of lost income.

Your Comments

How have you handled non-paying building clients?  What lessons have you learned from hard experience?

Graeme

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