I know that sounds like a weird question and it doesn’t even seem to make sense. Isn’t ‘non payment’ and ‘debt recovery’ kinda the same thing?
In fact they are very different. It is that difference that explains why trade contractors wait until the verge of bankruptcy before trying to recover their money.
Here’s the difference I’m talking about.
‘Non payment’ is the phase where you haven’t been paid for a lot of work, but you still think you will eventually get paid because your client really, really wants to pay you.. ‘Debt Recovery’ is the phase after that, where you’ve finally realised that you’re client actually has no intention of paying at all.
Non payment and Debt Recovery break down into 4 phases.
Phase 1: Tolerance – ‘The client just needs a bit of slack, he’ll pay me next week’.
Phase 2: Pity – ‘The client is being screwed by the developer/principal. Poor bloke. I’ll keep working to help him out. He really wants to pay me and I’ll get paid eventually’.
Phase 3: Anger – ‘I’ve been working for nothing for three months. I’ve run out of cash. I’m really tight. I’m going to call him every day asking about my money. I’m going to email him three times a week, and I’m going to send him some nasty letters.’
Phase 4: Debt Recovery – ‘My client is not returning my calls, emails, or letters. He’s threatening me with Liquidated Damages if I stop working. If he thinks I’m just going to wait around while I go bust he can think again. I’m starting action to get my money’.
Is this sounding familiar?
Now there’s no problem if you can move through each phase real quick and then start debt recovery….but what do I see time and time again? A contractor has spent 5 weeks in phase one, three weeks in phase two, and up to six months in phase three!!
By the time they come to me they are punch drunk, furious, and stressed.
The reason the contractor has reached this stage is due to a lack of understanding of THE key fact that gets forgotten…… the contract!! If you case your mind back to that long, long time ago in a galaxy far, far away, around the time you accepted the contract you’ll recall that there was something in there about you getting paid every month. Remember that? You might even remember the bit about payment being due at a certain time after submission of the progress claim/invoice.