If you’ve been in the contracting game any length of time, you’ve probably run into this. You’ve done the work, and now the client isn’t paying. Sometimes, it’s as simple as sending a reminder to them. Make sure that you have the right contact for accounting and send reminders at regular intervals. This can be automated through most common bookkeeping apps.
If you’ve sent a bill and reached out directly a couple of times, and the situation still is not resolved, consider the points below as a next step.
There are a dozen reasons that a customer may not have paid. While it’s probably just not at the top of their to-do list, it’s possible that they are choosing not to pay. Perhaps they aren’t comfortable with the quality of your work or something else is amiss and they’re not satisfied yet. The point it, contact them directly by phone or in person and ask what the issue is.
If your client is withholding payment, it’s very unlikely that they want to deal with a different contractor. They want leverage to get you to rectify the problem.
Consider whether redoing the portion of the work they’re unhappy with is worth it in the long term. If it’s only going to take a couple of hours and you think there’s a pretty good chance you’ll walk away with a happy client and a 5-star Google review, it probably makes sense to just do it.
If that’s not an option, you can try to satisfy them by offering a discount on the work. If neither solution is viable, you may have to take legal action.
In some situations, a contractor may be able to place a builders lien on a property if payment is being withheld. This almost always has a cost and can really sour the relationship. That said, it’s a good way to get the bill paid and if that’s your primary concern, you may want to look into a lien.
If you’ve exhausted all of your other options, you may need to pursue payment through the courts. Suing somebody can be a time-consuming and expensive endeavor. Before you do anything, it’s wise to consult with an attorney and have them advise you of your options.
Having to deal with clients who don’t pay absolutely sucks. Fortunately, there is a lot that you can do to avoid those types of situations.
Even if you’re just working by the hour, it’s a good idea to have a contract. Even a one-pager that lists the hourly rate, and the scope of the work down to the smallest details. Note who is paying for what. For example, if your client is directly footing the bill for gravel or dump fees, make sure that’s in there. Include “what ifs” as well. You should also include payment terms and the forms of payment that you are willing to accept.
This is important in any business. The last thing you want is to get to the end of a job or project and have to deal with a customer who had a different understanding of what the finished product would look like. Walk them through the contract line by line. Explain each piece of it in detail and outline exactly what they can expect as a finished product. If there are problems later on, you can refer back to the contract and misunderstandings will be much easier to resolve.
Clients vet contractors, why shouldn’t a contractor vet a client? If they’re in the middle of a larger project, there are likely other sub-contractors on the job that you could contact for a reference. If the client you’re working for is a builder or another contractor, it’s completely normal to ask for a reference or two. You can even just reach out to another business that you know they’ve worked with directly.
If you’re working for a homeowner, or if you’re in a small community, you can ask around. If you can’t get any information about the person or you’ve got a bad feeling about them, you may want to just decline the job and move on.
Always. Get. A. Deposit. It’s common practice for larger contractors to take payments at predetermined intervals throughout the job. For projects where you’re working for a homeowner, I suggest requiring half up front, with the rest payable upon completion of the job. Sometimes clients may ask for net30 or even net60 terms to pay. I don’t suggest doing this as you’re a contractor, not a bank and in 30 or 60 days the job will be out of mind and you may have more trouble collecting.
It’s tough for any business to figure out how to manage these situations. If you’re searching ‘what to do when an excavation client won’t pay‘ you’re already in the thick of it. Sometimes, the worst case scenario will play out and you may end up having to take a client to court. That said, implementing the steps above will give you the best chance of avoiding that.