Editorials
Getting paid
By Tom HatlenLast issue I wrote how GoldGlo Landscapes’ foremen collect payments, and nearly always get paid immediately. Without rehashing too much of what GoldGlo does, I asked Consultant Jerry Gaeta what he recommends to ensure clients pay their bill.
He says, “I think your number 1 reason why people don't get paid is they don't have a clear contract and they don't execute proper change orders. It isn't clean enough at the beginning.”
The contract spells out the terms. For example, “A deposit in the amount of $XXXXXX will be due upon the signing of the contract. The balance amount of $XXXXX will be due….”
For residential clients, Jerry says putting the terms in writing isn’t enough. You need to verbally go over the dollar amounts and due dates with the client. For change orders, go over both the dollar amount on the change order, and the new dollar amount for the project total.
Jerry says, “Contractors will talk to the customer about design. We'll talk about project timing. But, we won’t sit there and talk about ‘how you're going to pay me.’”
How much should you charge for a deposit? Jerry says it depends on your local economy and the size of the project. “If you're doing a 2 or 3 day job, typically, I've seen people get anywhere 25% to 50% down and balance upon completion. On larger projects, I'm a fan of progressive payments for cash flow. If it's a 4 week job you might set it up to get 25% every week.”
If someone refuses to give you a deposit, talk it thru with them. “99% of the time they've been burned by a contractor in the past. They paid a deposit and the contractor never showed up.”
Go over things like your references from other customers to reinforce their confidence in you. Explain that you need to deposit to cover materials costs, etc., and that you can’t serve as a bank.
If they’re still uncomfortable making an advance payment, Jerry suggests delaying the deposit. "Here's what we'll do. The day that we start, I will be there and you give me the check for 50%. This works for most. For those who still won’t pay a deposit, I’d question whether that client is ever going to pay you at all.”
Jerry says the final walk-thru is another thing that residential contractors neglect to do, and not doing so delays payments. People will hold off until their questions are answered. Even if there are no questions, your invoice goes on hold in the bill box.
Remind the client of the walk-thru 24 to 48 hours in advance so they have time to review the project. At the same time, email the final invoice and change orders so the client can digest it all.
The final walk-thru should be largely without surprises if you’ve done a good job of communicating to the customer – not just on payments and pricing, but also on ensuring customer satisfaction. GoldGlo’s communication process does this.
Every day of the project, the person who will collect the final payment at the walk thru asks the client: “Are you satisfied with everything we’ve done so far?” It’s almost a daily walk-thru.
Jerry emphasizes that the final walk-thru is not for dropping off a 30-day invoice. “With residential clients, you should be able to collect that money immediately. Walk it, and get your money when they're happy.
“I find a lot of times contractors don't want to ask for their money. Even some small companies send out invoices. And they give up too easily if there's any kind of dispute. Bottom line, if someone’s not paying, you pick the phone up and you call the person. You don't email them. You don't text them. You need to be polite, but you also need to be firm.
“You ask what's going on. You want to find out why they aren't paying. Do they have an economic problem? Did something happen? How can we work it out? Can we do weekly payments? Look for options.”
