Many years ago I was involved in a large job with an interior designer. She told me up front that she would be paying for the labor of what I was doing. It was quite a large job and I was there for a while. In talking to the other contractors, I found that this designer was footing the bill for the entire remodel herself with no upfront money from the homeowner. She paid for the remodeling, the carpet, the wallpaper, and all other materials. All the labor for the trades was going to be paid by her once the job was completed and she got paid.
In talking to the homeowner I learned that he was a workman’s comp attorney. From what I know of these type of attorneys, all they do is sue people and they are the most likely of all to not pay once the job is complete.
This job was making me nervous, so when I was done, I talked the decorator into letting me bill the homeowner myself. She finally agreed. Then I spoke with the attorney. He said all bills were to go through the decorator. I told him that yes that was true but that she had told me I could bill him directly myself. He finally agreed, and I went that night and picked up a check from him. When the job was finally done, the decorator and the attorney had a falling out over the bill and I don’t know if she ever got paid.
She should have required the homeowner to pay one-half of the price of the materials upfront before ordering. With her markup that should have covered 100% of her cost. Then the other half should have been paid on delivery – on delivery not installation. As she was making no money off the labor, she should have had the homeowner pay for the labor from each contractor on completion of their work.
Dividing large jobs into small bite size chunks for payment will prevent many problems with collections.
That is where # 44 came from.
# 44 Don’t work for lawyers.
Some lawyers only pay by lawsuits. This week I spoke to a painter that had been burned by a lawyer recently. When you find out it’s a lawyer, bid the job too high or tell them you just don’t have the time at the moment to do the work and let that job slide — even if you are not busy. Busy without getting paid is a sickening feeling. Better to go fishing and pray than to deal with the stress of being stiffed.
#45 Ask who is paying for the job.
We ask up front, “Are you paying for this or is someone else?” By asking this question, I have heard, “I am not paying; this is a new house. The builder, plumber or manufacturer is paying.” Ask for the phone number of the person they said was paying and verify. I have had several times where the builder said, “I gave them your number to do the work but I am not paying.”
I forgot to ask on one job a few years ago. In order to have access to the malfunctioning parts, we had the builder take the brick off the outside of the house and then take the sheeting and insulation out. In the process of repairing the unit, I found out from the wife that the unit had no warranty. I stopped working and called the builder to see if he was paying. “NO!” He said the plumber was. I called the plumber and he said, “NO! I thought I bought a good unit and that the wholesaler was paying.” Well, the wholesaler said that the manufacturer’s warranty was up two years earlier, and there was no way they were going to pay.
So I leaned a piece of plywood over the hole, called the builder and told him they needed to figure out who was paying since there was no warranty and call me back. Two weeks later the plumber called and said he was paying because the builder threatened to fire him if the plumber did not pay to fix the unit. (Personally, I would have told the builder to stuff it if I had been the plumber, but a lot people don’t stand up for themselves.)
If I had finished the work then found that out that no one was paying, it would have been very hard to collect. Don’t get caught in that trap. Always discuss the money issue up front. Most people have no problem with discussing payments up front. The people that do have a problem with it are the ones you want to watch.
I have also found that if you are willing and open to discuss the payment issue up front, they have more respect for you and getting paid becomes a far smaller problem than it might have been. They see and respect your confidence, and may decide to ply their non-payment craft on someone else.
It is always uncomfortable, but the feelings of not getting paid are far worse.
# 22 Tell people up front what the cost is going to be.
This way there are no surprises for them. And they can’t come back with mock surprise at the cost to make you feel bad and reduce the price after the job is finished. It may be uncomfortable talking about money before the job is started, but if you want to eliminate collection problems, you have to do it.
# 33 We get paid on completion of a commercial job.
Many years ago I was working late one night in a mall and talking to the carpet layer and the subject of getting paid came up. He said he was getting a check that night when he was done. “How did you do that?” I asked. He had told them that was the only way he would do the job. WOW! I never forgot that.
It took us four months to get paid by that Wisconsin company.
As we started to do more commercial jobs in the business we are in now, I incorporated the same idea.
I tell them up front we can do the job, but we need to be paid the day we are done. Can they write me a check? Many times writing a check is difficult for them to do, so I tell them a credit card will work. I tell them to talk to their boss and let me know. Many commercial jobs have company credit cards on site. I have never been turned down.
The problem with billing on commercial jobs is that most of the time their offices are out of state. I have been told, “Well, I send the invoice to Arkansas and the job super signs off on it, then it goes to accounting in Alabama, then the Partner in New York has to review it and write the check but the checks are sent from California, and there is no way for me to tell you what part of the process your invoice is in.”
Meanwhile, the contractor has finished the job and left the state. The foreman I talked to has changed jobs and works for someone else. Sometimes you are left with no one to contact and no phone numbers.
I would rather lose the job than go through that to collect the money.
We do the same on any out of town job. They pay while we are there or we don’t go. We settle that issue up front. I tell them all “It is nothing personal, it is just the best way we have found to not have to spend our time chasing money.” Most understand and will arrange it for you.
Also, I have had local entities where the bills are paid from some out of state company. We ask them to have a check sent to the local company, and then they give it to us on completion of the job. You just have to have the attitude that I do not want to chase that money down.
This works for small companies with small bills. If you are a larger contractor, you have to find ways to take care of the problem. Every business will have a way to collect in a timely manner.
Once you adopt the attitude that you will get paid, you will find that you get paid much more often. Even if the amount is small, it is the principle of the thing. You deserve to be paid, so don’t give up. Be a thorn in their side until they take care of the bill.
One contractor I talked to sends them a final letter stating that they will be turned over to a collection agency in seven days if the bill is not paid. He states that the collection agency’s fee will be attached to the bill and they may notify the credit bureaus.
Another method I have seen involves a set of letters on this web site: http://stevensricci.com/collection-letters/.
However you deal with collecting, remember, you deserve to be paid. Ignore the negative things that people will say and just stick to your course. You will become less uncomfortable with talking about the money up front over time. Remember, your family deserves your best effort.
Whatever you do will become a habit. If you develop the habit of allowing people to not pay, you will lose thousands of dollars that you worked for over your life time.
The first thing I ALWAYS do if my wife gives me an account to collect is pray and ask God to help me resolve the issue. I firmly believe that God has saved my A** many times over the years where otherwise I would have gone away with an empty sack. Ask me about them sometime, and I will tell you those stories, too.
The righteous are bold as a lion.
Not hateful or arrogant just purposeful and bold. A mind set like a rock.
The longer you are willing to wait to get paid, the longer they will take to pay!
Learning to stick up for yourself and being bold is all part of The Prosperous Life.
