Nothing is more frustrating to a general contractor and, in turn, to a subcontractor than being paid late. Here are 10 ways to help your company receive prompt payment of bills from your customers.
1. Check out financial strength. Before signing a contract, ask for financial references. When necessary, ask for project funding to be placed in escrow.
2. Include payment provisions in general conditions. Stress the need for prompt payment. Emphasize to the owner that the low price is based on prompt payment to subcontractors. Explain payment provisions such as “within five days after receipt of monthly payment request.”
3. Know your client’s payment policies. Many delayed payments result when the contractor does not submit the invoice with the proper format, backup and number of copies.
4. Print payment provisions on your invoices. Be up front with provisions.
5. Send out invoices on time. Submit invoices so that they will arrive by the date required by the contract.
6. Offer early payment discounts. Find out if the client will respond to a reduced payment policy for early payment.
7. Charge interest on delinquent payments. Explain late-charge provisions in the contract. Charging interest sends a message that it is to the client’s advantage to pay promptly.
8. Settle disputes quickly. When payment disputes arise, find out the facts. Quickly correct your errors, if any. Point out any errors made by the client. Reach a “win-win” agreement as soon as possible.
9. Pick up the check. Rather than hear ““the check’s in the mail,” offer to come by to pick up the invoice payment.
10. Ask for interest notes. If the client is in financial trouble, put the outstanding amount into an interest-bearing note until final payment.
You can improve your financial management. Ask your accounting professional to review your accounts receivable and advise you concerning collections.