After ALL these years over the past year I have been stiffed by more people than I care to count. In years past I didnt have one customer stiff me but this year it has gotten out of hand. Came close to knocking a guy out this past friday (yeah the idea of jail food wuz enuff to stifle my temper)
Decided I would no longer ride it out and hope people will do the right thing. Will make it a policy to be quick to lien and no longer hesitant to sue in small claims court.
How do you all handle people who stiff you?
Replies
Fortunately in my business I can get the money up front (stage payments, but in front rather than behind). Anyway, if I did have this problem I would tell the welsher that if he didn't pay I would sell the debt to a debt-collection agency (do you have those in the USA?). In the UK this would be considered a bit worrying because the only way debt-collection agencies can make any money is by collecting debts, and they are good at it. They usually employ quite large, scary looking people.
John
It's your contract........spell it out.
My typical agreement calls for a small depostic and then "progressive performance payments".
On a big job, this sheet will take up the whole page.
Works even on a medium job.
Example: The total cost of the work described is $40.000.00
A deposit of $8,000.00 is required (notice I don't use language that asks or is subject to scrutiny.)
Progressive performance payments are to made as follows:
$2,000.00 upon completion of demo
$5,000.00 upon completion of plumbing rough-in
$3,000.00 upon completion of electrical rough-in
$3,000.00 upon delivery of tile
$3,000.00 upon completion of Drywall taping
$4,000.00 upon completion of tile floor.
$4,000.00 upon completion of tile walls.
$4,000.00 upon completion of trim.
$2,000,00 upon servicable completion and issue of punch-list
$2,000.00 upon completion of DESCRIBED work
All adition work shall be bill; Time & material @ $60.00 per man hour is is due upon completion of task. All quoted work requires 50% down and the balance upon completion of quoted task.
Some will say, "hey, the client might write 3 checks a week. What a pain!"
So what? What I point out is that everything gets paid for as it's done. Everyone gets paid. The work moves along. And if the client wants to rip me off a couple of grand, I'm off to the small claims and the next job. Meanwhile, all my suppliers and my subs are paid. The client no longer can dictate the outcome of my business.
It works.
McDonnell's approach and mine are the same. Never let the client owe you more than a few thousand. Spell out exactly when you are to be paid. Handle all of your pre-lien stuff correctly and if you have to file you can.
I worked for a year for a guy who was incredible diligent about collecting money. He would make a call as soon as something was complete and tell the client he was coming to get the check. Then he'd go do that and deposit it immediately. I've known many contractors who were shy about asking for their money. Not good...
Guy before that handed in a bill every Friday for payment by Monday morning. If the check wasn't there we'd go elsewhere.
I do it the same way that you and david do it. This guy was a friend! Good grief how many times do you have to learn the same lesson
Is there more to the story? Is there a dispute about the work? How much money are you talking about?
Al Mollitor, Sharon MA
With friends and family, it makes or breaks the relationship. Keep it all business.
My brother, the lawyer, has been after me to remodel his bathroom. So last week, Yep, even he got a contract. See it as an argument killer. Once your clear about what your gonna do and what you expect the other party to do, it's all smiles.
Mcdonells' got it right, but I'd make one small change. Instead of asking for next payment (for example) when framing is done, say next payment when sheetrocking (or whatever) begins. If ten feet of framing isn't complete somewhere it won't hold up your next payment. Just a thought..... this works well for me. Buic
buic... i adopted the same method...
deposit..
commencement..
foundation poured
start framing
ready for rough
weathertite...
ready for plaster...
etc....
.make the thresholds of payment in my favor so there is no dispute about "completions"Mike Smith Rhode Island : Design / Build / Repair / Restore
Hi Pete;
I am a business consultant and have also managed very large corporations. Many small businessowners have this problem. Many of my clients have had this problem. The most important thing to do is to get a percentage of the cost of the job at the initial contract signing - usually 25%. I agree with the staged payment suggestions that were made in other replies. The following are some suggestions for you:
- Always have a section in your contract with the customer (always have a contract) that clearly defines the customer's payment responsibilities, and what you have the right to do if he/she fails to pay you.
- Make sure you have a section in the contract stating that failure to pay any portion of the job could and/or will result in:
- Have an attorney draft a model collection letter for you that can be customized by you in each situation. It is also important to establish a relationship with an attorney just in case you do end up filing a lien, going to small claims court, etc.
- Perform a credit check on each customer before accepting the job. Make sure you include that you will be doing a credit check in your work contract. It is very inexpensive to get credit bureau membership and reports and can save you a lot of money in the end.
if you think this stuff is too "big corporation" and you are just a little guy....think again. Rip-off is rip-off. It's ethically wrong and not good business practice. Protect yourself, stop being a nice guy and naively hoping your customers will do the right thing! With what I am suggesting, your customers will take you more seriously and think twice before stiffing you.
Hope this helps!!
- Syb