When I sit in front of my clients and ask them to tell me the story of their payment issue I often hear warning sign after warning sign that my client did not pick up on. They tell me about what the builder or project manager said or did which were clear signals that payment was going to be an issue. Yet they kept working, oblivious to the dispute that lay ahead.
If you can spot these signs early you can address non payment early. It is better to argue about $20 000 than $150 000.
I will outline the most common below.
Informalising the relationship
You and your client are not mates, friends, or relatives. You are in a business relationship. That means that your relationship is governed by the contract. Keep it that way. A key cause of disputes is where each party agrees to deviate from the contract in a series of informal works or undertakings. Then the client refuses to pay for those works, and then retreats back to the contract, and denies any additional agreements.
You all know what I am talking about.
You are entering into these informal agreements because you want to be a ‘good bloke’. Forget it. The contract is the agreement. Any changes need to be run under that agreement.
You have a business relationship. It is ‘fee for service’. Don’t lose sight of that.
Dumping the paperwork
Often a contract will require certain notices and documents to be completed, sent, signed off etc at certain points. For example you may send your client an Extension of Time [EOT] request. Or you may quote a variation and submit it for sign off.
Now your client does not sign it or respond as the contract requires. Let’ say you get a verbal approval, or your client refuses to sign or makes an excuse. Then you accept this and go ahead.
You have just left yourself wide open. Your client will deny approval for any of it. I often see contractors who follow the process as described in the contract, but their client doesn’t. For example an EOT Notice may require a response in writing, but the client does not respond at all. (Clearly to avoid approving any EOT.]
Keep to the process. If the contract describes a process for each side to follow then hold your client to that process. Don’t do anything unless your client does their part too. If a variation has to be signed off by the client then don’t start it until it is signed off. If an EOT Notice goes unresponded to, then insist that it is, and send written correspondence noting that your client has not responded.
These are all examples where your client does not want to create written evidence of their agreement to anything that might cost them money. Don’t let that happen.
Suddenly you can’t get your client on the phone. You know what I’m talking about. Messages unreturned. Faxes unanswered. They always appear to be in meetings. This is a strong sign of a payment problem. This usually happens in conjunction with other issues. For example you might be calling to follow up on your EOT notice or your variation quote, or when your promised payment will come in.
Don’t accept this and keep working. A good strategy is to first send written notices to your client noting the number of calls and messages you have left and that they have not answered.