Proactive Tips to Make Sure You Get Paid
Just about every builder has at least one story about a client who took ages to pay. To make sure you are fully compensated for your projects, consider these proactive tips for protecting your interests so you can get paid every time.
Set clear terms.
Spoken agreements inevitably lead to confusion and disagreement. Make sure you issue an iron-clad contract outlining not just what you will provide, but also the terms of payment. The contract should be clear, easy to understand and free from any possible misinterpretations. It should include the expected payment amount, the deadline for payment and clear consequences for late payments. It should also be signed by you and the client.
Include strategic reminders.
Consider including your company’s payment terms on the back of your invoice, along with a clear due date on the front.
Use proven techniques.
According to research from the cloud accounting company Freshbooks, business owners enjoy quicker results when they charge interest on late payments and give only 21 days to pay. They also tend to have better results when they remain polite. In fact, research shows that including simple phrases such as “thank you for your business” can increase the percentage of paid invoices by over 5 percent.
Simplify the process.
Streamline your invoicing process by using software such as QuickBooks. This can reduce delays and help you ensure that nothing falls through the cracks. You should also make it as easy as possible for clients to make their payments. Offer as many options as possible, including modern electronic payment methods, which eliminate many excuses for delayed payments.
Create incentives and deterrents.
Consider offering a discount for early payments, along with penalties for late payments. A builder has the legal right to charge interest for late-payments. You should also state that the client will be responsible for costs related to any potential debt recovery costs. Just make sure to cover yourself by including these terms in the contract.
State your right and intent to stop work.
If a client falls behind on progress payments, you have the right to stop work and remove materials. You can also attempt to recoup costs associated with these measures. Again, you will want to include this in your contract in case the client wishes to challenge you at some point in the future.
Stand your ground.
Some people use delays as leverage to negotiate lower costs. This can be especially effective on builders who operate under tight budgets. If the client has a strong case for requesting a reduced rate, it might be something to consider. Ultimately, however, it pays to remain firm with your pricing, especially if you have a rock-solid contract that clearly specifies your policies.
Be a person first.
Bear in mind that many honest clients have genuine reasons for not paying on time. It might be a family emergency or simple forgetfulness. Try to stay cool and courteous at all times. Communicate with the client and maintain your professionalism. If you determine the client is making unreasonable excuses, calmly explain your terms for collecting outstanding payments.
Things to Consider
While most standard building association agreements do a good job of protecting contractors, they sometimes need adjustments to suit particular payment terms. By having a lawyer evaluate these agreements, you can protect yourself against all eventualities. It may seem like an unnecessary expense, but it could ensure you get paid and end up saving you thousands of dollars in lost income.
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