How to Handle Settlement Offers
Hi, Anthony from Contractors Debt Recovery. I’m back. Let’s talk today about settlement offers. That’s where there is a Security of Payment dispute and in principle you’ve accepted that you can negotiate a final figure for both of you to part ways. So that is a settlement offer. Of course, the first question everyone asked themselves is how much. My advice to you is must be reasonable. It mustn’t be insulting.
Now if it’s insulting they’re trying it on and testing your boundaries. So the first of it being reasonable is that you must simply reject is if it’s unreasonable. Just reject it. Saying that is way too low. That is way too low and that is ridiculous. Go away. Come back again with something reasonable. The trap that many contractors fall into at this point is to make a counter offer.
If you’re owed $150,000 and your client says, “Okay. Will you take $65K for it? And you say, “No. I need at least a 100.” Well you’ve just fallen into a trap because your client is not going to agree to your counter offer for a hundred. They’re going to say well if he’s asking a hundred, he’s highballing, maybe he’ll take 80. So that’s just a race to the bottom by making a counter offer.
Your job is that you’ve done the work. You’ve done your job. If your client wants a settlement offer, they’re the one making the offers and they’re the one considering and/or accepting those offers. Okay. So the first thing is never make a counter offer. Just listen to and entertain the offer and see if your client gets to one that’s reasonable that you might accept.
I won’t tell you what reasonable is. You’ll know it when you see it and it will depend on other variables and your personal circumstances and so on. But it must be reasonable to you. The final thing is the logistics. So if you’ve agreed on a figure. Let’s say you’ve agreed. When will they pay it? How many of my client says we’ve done a deal and I say when are you getting paid. I didn’t think about that bit. That’s the most important bit.
You’d got to have a deadline for payment. If you agree on a figure that’s part of the way there then when is it going to be paid? Finally, where is it going to be paid? Are you picking up a cheque? Is it going to be paid in a particular account? And finally how is it going to be paid? Is it EFT? If it’s a cheque, make it’s a bank cheque not a company cheque. Or, is it going to be credit card arrangement or instalment arrangement or whatever it is needs to be detailed.
So to summarise make sure you accept a reasonable amount for your work, make sure you’ve agreed with your client when you agreed on an amount. When it’s going to be paid? Where it’s going to be paid and how it’s going to be paid. All those things need to be detailed in writing and sign off so that you got a proper settlement offer on the table. If it isn’t all those things it’s just a lot of talk. So be weary about what you’re accepting and make sure that if you do a settlement offer with your client you do it correctly. I’ll see you next time.