Here’s a question for you… what is the most common period of time that elapses between a payment being due and the contractor sticking up a hand and asking for help? 8 months!!!
That’s right. In the hundreds of payment matters I see a year, the most common thing I see is a contractor finally deciding to chase his money in April for work completed in the previous September. This is absurd and one of the reasons why lack of cash flow and rising insolvencies continues to be major features of the construction industry.
You MUST adopt controlled debt management policies and be onto your debtors within no more than 3 months. It is common to hold off your pursuit when your client says “the money’s coming, just a few more weeks”. Or “I’ll make it up to you on the next job.” This means that you are financing his operations. Here are 6 reasons why you should get on to your clients quickly to recover your money.
The Money Disappears
The money available to pay you only exists so long as there is a contractual chain to generate it. Once the work is done and everyone goes home, the money goes home too. All contractors in the contractual chain are fed by cash from the same source, so you need to be chasing your money while that source is still there, and ideally while that source still needs your work. Eight months later when everyone has packed up and gone to the next job, it will be very hard to chase your money.
The Value of your work Diminishes
The more time that passes after you have delivered your work, the less it is worth. Do not think for a minute that your debtor is looking at your work and thinking how wonderful it is and how deserving you are of your money. This is a delusion that too many contractors suffer from. Your client is actually thinking ‘Look at all this work I’ve got for free!’
And the more time that passes the less your work will be worth, until in a year’s time you’ll be happy to get half the value if you’re lucky. So it is key to understand that the passage of time acts to reduce the value of your work and the amount you will be likely to recover if you chase it. So chase early!
Following form the previous point, should you actually engage your client debtor and demand your money, you