Whether you’re a residential or commercial contractor, administered by a consultant or not; getting paid promptly is a recurring problem. There are some things your company can focus on as a team in order to accelerate payment certification and collections:
Ensure good quality workmanship – NO DEFICIENCIES!
If you’re a contractor, you’ve probably experienced this situation:
- You submit your invoice to the contract administrator thinking that it should be certified for payment within a few days.
- The contract administrator visits the site to compare what has been invoiced to what was actually completed (not that they don’t trust you… it’s just their job).
- They email back with photos and a list of items that have not been completed as per the contract specifications and refuse to certify the invoice until they have been rectified!
- You enter scramble mode to get back to the site with the appropriate resources to fix what could have been done properly the first time. Depending on how busy you are, this could take a couple weeks!
Not only is this costing your company additional time and resources, it is preventing you from getting your payment certificates in a timely manner.
It’s critical that your staff understand the direct relationship between quality and payment certification. You could ask them: “If this was your property and the job didn’t meet your quality standards, would you approve our invoice?” Of course not, yet for whatever reason, this is not fully understood by construction crews.
I believe the issue is that most people in the construction industry are focused on lagging indicators, instead of leading indicators. For example:
“The invoice is now delayed, let’s make sure to go back and fix the deficiencies so that it gets processed!”
As opposed to:
“Let’s focus on quality so that we don’t have to come back to site and our progress invoices get certified quickly”
What are you going to focus on?
“It’s critical that your staff understand the direct relationship between quality and payment certification.”
Don’t allow your change orders to delay your invoice.
See 7 Ways to Expedite your Change Orders as a Contractor. If you’re waiting for a change order to be able to invoice, you can’t possibly get your payment certificate quickly, can you? So go get that change order processed!
Send your invoice in on time.
Filling out and sending an invoice might be one of the last things on your to-do list if you have clients emailing, consultants calling and/or issues in the field. However, it’s important to realize that every day that passes before you submit pushes your collection date back one day. Don’t procrastinate and get it done!
It also helps to have a cloud-based contract management and invoicing system that you can use from home, say Saturday morning before the kids wake up. No distractions, no phone calls; just you and that invoice.
Ensure your billing doesn’t have any mistakes AND don’t overbill.
Similar to my first point, if you send an invoice with mistakes or items that are overbilled (by accident, of course, you would never do that on purpose) it will undoubtedly cause delays in your payment certification. Clearly, any additional back and forth between project managers and contract administrators will add delays, especially by email.
Another point to consider, as a gross generalization, people tend to deal with their easiest tasks first. Think about it… what is easier? To certify an invoice with no mistakes or to have to compose an email, send photos and make a case that there are mistakes on a contractor’s progress bill?
“It also helps to have a cloud-based contract management and invoicing system that you can use from home…”
So you’ve received your payment certificate from the consultant, good work! Now you have to receive funds from the owner. Keep these next steps in mind to help with your collections:
Don’t take it personally – just follow up again.
Once the established payment terms have elapsed you will most likely have to reach out to your client to find out when you should expect payment. Whether you’re calling, emailing or sending statements, your efforts aren’t always going to be reciprocated.
Don’t take it personally, just follow up again, calmly and professionally.
Cultivate relationships with your client’s Accounts Payable (A/P) Department.
People tend to help people they like. So how can you get on the “A/P’s” friend list? Well, there are entire books written on the subject so I won’t bore you with my version of Dale Carnegie’s Rules for Making Friends and Influencing People. Although, if you haven’t read his book, I highly recommend it to everyone.
I do however suggest you put yourself in your client’s A/P department shoes for a moment and think about their situation. Say this individual works for a large developer and all they do is accounts payable… They receive hundreds of invoices a week, hundreds of emails a week, and probably dozens of phone calls ALL for the same reason: “When will I receive my payment?” and they are supposed to return everyone’s emails?? That’s a LONG to-do list!
So, how do you stand out???
Go out of your way to put a face to a name!
Ask for them if you are picking up a cheque and… (insert Dale Carnegie Principle here). Or you could take them out for lunch. Call them up and say: “Hey, I’m in the area and I was curious if you were hungry?” then get to know them.
Whatever you do, you have to set yourself apart from the masses!
Become a valued strategic partner – not just a contractor.
I’m thinking this section deserves a whole post on its own but here are some things to think about:
- Are you a valued contractor for this client? Or are you on your way out?
- Do you always act in the client’s best interest?
- Are you constantly delivering on time and stress-free?
Partners get paid quickly, disposable contractors do not.
Don’t Lien the job.
Don’t even threaten to Lien the job unless you have exhausted every possible option and you know you will never work for this company again. Although it’s a contractor’s right to lien a job, it leaves a horrible taste in your client’s mouth. Oh, and by the way, the industry isn’t as big as you think; people talk about this kind of thing and it’s not good for business.