Many contractors suffer non-payment frequently and struggle to get what’s owed to them. Non-payment is a disease affecting the construction industry.
For a long time, contractors had virtually no bargaining power with which to extract payments from head contractors or principals. Legal action cost too much money and time, and the industry used this to its advantage, leaving contractors broke or struggling with lack of cash-flow.
Simply put, non-payers could get away with it. These days, their practice has changed to that of only ‘part paying’ monthly claims and then not paying the final claim at all.
The thing about payment is this: The decision not to pay you is made right at the start. At the very first interaction, your client is already deciding whether or not you are going to get paid. Remember, a client will withhold payment from a contractor whom he fears the least.
In fact, much of the cause of non-payment lies with you, the contractor. You can control many of these causes, and reduce or eliminate them.
There are 6 key reasons why contractors do not get paid.
1. Working in isolation
2. Making a weak personal impression
3. No debtor policies in place
4. Unable to prove anything in relation to your work
5. Your client knows the contract better than you do
6. Unable to counter unjustified defects and backcharges
Let’s take a closer look.
Working in isolation
You act alone using only your own experience and common sense. Given the complexities of today’s contracts and disputes, this is rarely enough. Look at your client; doesn’t he have a group of professionals surrounding him? Project managers, contracts administrators, lawyers? This creates a huge difference in power between the lone contractor and the client’s ‘team’. The contractor has little chance against a group of professionals working in a team.
Maintain a relationship with your own solicitor, quantity surveyor, expert investigator, or other professional to help you deal with payment disputes.
Making a weak personal impression
Many studies have been done on how first impressions are formed, and they are remarkably consistent.
55% is how you look; dress and grooming
38% is your voice, language, and posture
7% is what you say
Now think about that. If you meet your client for the first time with dirty clothes, sweaty hands and no business cards, you are already creating the impression that you are not a professional, and probably a soft touch when it comes to payment.
Create the impression that you can manage payment and administrative issues. Have a pen ready when you need it, speak confidently, look the client in the eye, and make sure your business card and quotation/paperwork don’t look like they’ve been dipped in a meat pie.
No debtor policies in place
Without a systematic method of chasing debt, it’s unlikely you’ll pursue the client as soon as payment is overdue. Months may tick by before anything is done, and even then most contractors will make a few phone calls that get the standard response of “oh we don’t have that invoice…can you send us the invoice…”.