# For contractor veterans out there: have you noticed it's getting harder to get paid?



## Fence & Deck (Jan 23, 2006)

It's getting worse and worse, trying to get paid. 
I changed my payment structure around this year. For 29 seasons, I took a 30% deposit and payment on completion. Now, I take 10% with the contract, 30% when we start, 30% at a particular milestone, and the balance on comletion. I try to keep the balance below $10,000, which in Toronto is the threshold for small claims court.

1] Right this moment, I am waiting for the final payment of $8000 for a re and re new fence at a townhouse condo development. The contract was $25,000. Friday, as the last board went on, and as per ouor written agreement on our contract, the manager said we'd have full payment on Monday. Well, Monday comes and goes, and it turns out the bookkeeper is on vacation until Nov 20. Nothing they can do. The other payments went fine.

2] My wife's first cousin had us do a $7000 fence. Outstanding balance is $5500. It was finished this past Saturday. Today he says he'll inspect it tonight (he stood over my carpenter for 3/4 of the job) and he'll get back to us. He also isn't sure about paying for any of the extras, totaling $600, which his wife asked for. Note: this is my wife's first cousin, whom we babysat 30 years ago.

3] We just finished a deck for a dentist. The job was sold in late september, and written on the contract it says 1st or 2nd week November. He calls Oct 15. Where's my deck? The salesman promised it would be finished by Nov 1 becuase he's going away for 3 weeks.
So, we finished it by Nov 1. A change he himself made required some electrical work, which he feels he shouldn't have to pay for.
Anyway, on Saturday he told my electirican it was a lousy job and he's not paying. Oddly, Friday afternoon, he'd told me he was really pleased. My electrician says the job looks just fine to him. 
Anyway, it took since Monday to find out from his office he went to Disneyworld for 2 weeks. Apparently, he didn't even tell his office, because they've had to struggle to reschedule 2 weeks of appointments.
Fortunately, he owes me only $3000.00

4] I have a major $40,000 project. I had it structured with progress payments, but then in the middle he added $6000 worth of work. The balance owing is $14,000.00. He's holding up final payment becuase there are 2 panels of tempered glass still to go in. The two panels were made incorrectly by...get this... the glass company THEY hired. Now he's expecting me to pay for the 2 new, correct panels. (it's only $150), but I'm pissed becuase he's holding so much money. And yes, I know how I should have done things, but it just didn't happen. I also have all this stuff written in my contract about non or late payment, but if I want to enforce it, it'll be a year or more in court.

5] Finally, here's a doozy.
Last year, we sold a $25,000 job to a gorgeous woman named Elvira. She wanted to finance the whole thing. Wells Fargo approved it as long as her husband signed it (she didn't). He husband was living in British Columbia, 3000 miles across the country.. He told the finance comapny that was because as an airline pilot he was required to have a residence there.
Finally, the financing was approved. 
We did the work (she was a ***** to work for). It was overseen by her desinger/landscape architect. On August 30 last year, he sent us an email telling us the job was fine, with the exception of about a half hour's work on a corner of the fence.
Next day, we get a letter from her lawyer telling us the work is of no value, has to be torn down, and will cost $40,000 to replace. She then threw my worker off the site with 10 minutes work left.
Then the lawyer sends us another letter threatening to sue because the house is now for sale, and they have lost value because of the poor work (which, if it was so poor, why did it lead to 2 other sales on the block).
Turns out: the husband was an ex-husband, hasn't been back to Ontario for 3 years, and has no ownership in the house at all.
We put a lein on, had it perfected, asnd are now waiting for our day in court. Wells Fargo did further investigating, and cancelled the finance. We had an independent evaluate the work, who says it is just fine.
Fraud, or what?

I had another one who wouldn't pay becuase the 6x6 post cap was a differnt colour than the rest of the caps, which were 4x4's. 
Another becuse the property line wasn't exactly in the middle of the 6x6 fence post (it was off to one side by 1/2")
Another because the contract called for a 2x2 planter, which was deemed 2 big, and refused to pay for the job until the planter was redone.

More and more excuses. It's getting rediculous.


----------



## neolitic (Apr 20, 2006)

Truly sorry for your grief. :sad:
My problem has been backing out
over financing before we can start.


----------



## Fence & Deck (Jan 23, 2006)

neolitic said:


> Truly sorry for your grief. :sad:
> My problem has been backing out
> over financing before we can start.


Thanks Neo. It's not grief, it's frustration.


----------



## DavidC (Feb 16, 2008)

I appreciated your frustration. In so many scenarios I have played the part of the lamb being led to slaughter on the last payment. After the last one and a conference with the attorney our pay schedule has changed. It will vary from job to job depending on circumstances but will always start with 10% scheduling fee paid at contract signing, next pay due when we start, progress payments as needed per job and final at substaintial completion. If any punchlist or other decrepancies manifest the customer may with hold up to 5% of the contract pending resolution, the balance is due immediately. If they don't pay we are not required to address any issues until they do per contract.

I make it a point to carefully go over this clause at the signing. They are told that we have to pay for materials used and cover our paid labor expenses regardless of any disputes. They can set the dollar amount to hold back, as long as it doesn't exceed 5%.

So far so good with this one. A couple have tried to work around it until I reveiwed the contract with them. Most just pay us in full because they trust us to take care of any issues. They usually get something free in return.

Check with your attorney for legality and wording for your area.

Good Luck
Dave


----------



## Heritage (Mar 20, 2007)

First off, that sucks big time...all of it. I hear ya.

We just walked away from a 500k+ contract because the client has a trigger happy lawyer. I'll save you the story but I could relate the story if you want, it involves a large toronto custom build outfit you may know.

I've always wondered if there was a way that we could report non-payments to credit reporting agencies. We are essentially financing the job until we are fully paid. When we are not paid, should that not constitute the same penalty measures as that of a typical financier? Is there anyway that we could structure our contracts to allow us to report bad debt to a credit reporting agency?

Or maybe they should create a new law that would not allow a contractor to finance any project for a home owner. So they would either have to purchase our services beforehand (just like how you have to purchase a vehicle before it's delivered) OR you have to go through a third party financing company (like escro (sp?)). The problem is, that unless they actually make it a law, nobody really wants to go through a third party company and pay extra fees. The courts/lawyers are feeding off our inability to work out contracts with home owners and vice versa. Just think about how many small court cases involve disputes between contractors and HO's.

I'm just thinking out loud here without having given this much thought, just some things I've been wondering about. I wish we could come up with a way to really minimize this problem, because it's just BS that we are so limited in fighting back against deadbeats. Am I alone on this?


----------



## rbsremodeling (Nov 12, 2007)

Here you go RBS 2008 draw schedule


30% deposit

30% when I *start *Demo/Framing

30% *Start *of rough-in plumbing/ac/elect

5%* Start* of drywall

5% final payment


----------



## Mike Finley (Apr 28, 2004)

Stone, your final payments are ridiculously too huge. 5-10% max. 5% is probably max if you are having problems. 

30% final payment is suicidal.

Change orders are due at finish of the changed work or even better and what I do is at time of signing of the change order.

*U crazzzzzzzzzzzy doing biz the way u r!*

:sad:


----------



## rbsremodeling (Nov 12, 2007)

Worst yet for most guys that 5-10% is there profit


----------



## WarnerConstInc. (Jan 30, 2008)

I have been leaving 5% at the end as well, it works out well too, because sometimes I get side tracked and the people know I will be back eventually to touch up or deal with something to get my last 5%. On the other hand, if they are total douche bags, F that last 5%!!!


----------



## bassfisher (Feb 27, 2008)

The real estate market in toronto has reached that peak and is now 
ascending the trough. things will get worse, lots worse.
And the rich SOB's in the upscales prey on pinching the subs to make
up losses. The bad news is it will get far worse from here, BTW, the
small claims is going to $25K because of the very facts you are mention-
ing.

Good luck all, time is now split between collections and actual work.


----------



## pcplumber (Oct 12, 2008)

*You need to use escrow accounts?*



Stone Mountain said:


> It's getting worse and worse, trying to get paid.
> I changed my payment structure around this year. For 29 seasons, I took a 30% deposit and payment on completion. Now, I take 10% with the contract, 30% when we start, 30% at a particular milestone, and the balance on comletion. I try to keep the balance below $10,000, which in Toronto is the threshold for small claims court.
> 
> 1] Right this moment, I am waiting for the final payment of $8000 for a re and re new fence at a townhouse condo development. The contract was $25,000. Friday, as the last board went on, and as per ouor written agreement on our contract, the manager said we'd have full payment on Monday. Well, Monday comes and goes, and it turns out the bookkeeper is on vacation until Nov 20. Nothing they can do. The other payments went fine.
> ...


It sound like you are having a run of bad luck. If this continues, you may consider having your customers put 100%, of the money, into escrow accounts. This can be done for less than $200. Then, at least, you know you will get paid. Once you get used to, using an escrow account, it will be a breeze. With the proper presentation, customers understand, and agree, to using escrows, when jobs are much fungolas.

One thing, you may consider is, write a policy so the problems do not keep recurring. You may be just having a run of bad luck, or maybe you need to slow down, and make sure you put change orders in writing, take extra special caution to explain charges for the change orders, and take extra special caution to make sure your terms of payment are clear.
In California, a progect is considered to be completed, when the customer is able to use the product, or service. This means, the customer cannot say a job is not completed, because we put an iron flange on a pipe, instead of a stainless steel flange. We also have a statement that says the customer can only hold 10% of the money, when waiting for an inspection.

You may consider writing statements that apply to your services. Also, for the customers who went on vacation, there should be a statement that says they have to pay interest, or a service charge that could start a few days after the job is completed.

These things may not apply specifically to you, but find your own words so you don't have to jump through hoops, like a circus dog, to get your money.

Everything has to be in writing, or you are going to keep having the same problems.


----------



## Grumpy (Oct 8, 2003)

Having less and less problems getting paid since I have done two things. 1) Phased out almost all new construction. GC's just don't pay on time. Final due upon completion doesn't mean 90 days. 2) Jeez I forgot the other reason, so I guess the moral is stay away from GC's. 

Oh yeah the other reason is my new lawyer. He's got me collected on every job without even filing a lien or law suit. Just a few strongly worded letters have done the trick.


----------



## Winchester (Jun 29, 2008)

Heritage said:


> First off, that sucks big time...all of it. I hear ya.
> 
> We just walked away from a 500k+ contract because the client has a trigger happy lawyer. I'll save you the story but I could relate the story if you want, it involves a large toronto custom build outfit you may know.
> 
> I've always wondered if there was a way that we could report non-payments to credit reporting agencies. We are essentially financing the job until we are fully paid. When we are not paid, should that not constitute the same penalty measures as that of a typical financier? Is there anyway that we could structure our contracts to allow us to report bad debt to a credit reporting agency?


You can give it to collections, and I'm pretty sure that effects their credit...


----------



## Fence & Deck (Jan 23, 2006)

My contract was written by a VERY sharp lawyer. I have everything in there about change orders, payment on substantial completion, no warranty if not paid within 5 days, all that. It's tight, and has proven out in small claims court.
However, just like the guy in my other thread, a lot of people, ESPECIALLY the younger ones, think a contract is one sided. I have to do what they want, but they can to do whatever the hell they feel like doing. Enforcing my contract means court, which means 6 months or more.

I average 160-180 projects a year. Out of that, some years I have 1 small claims procedure, some years none. I have had one civil court case in the last 10 years(see Elvira, above).
This year, looks like I'll have 5 claims, if not more. And the reasons are often so rinky dink.

Oh, and here in Toronto, provincial law allows a customer to hold back 10% for 45 days after completion regardless of contract wording.


----------



## Mike Finley (Apr 28, 2004)

Stone Mountain said:


> Oh, and here in Toronto, provincial law allows a customer to hold back 10% for 45 days after completion regardless of contract wording.


If that is the case I would make sure to change how I was doing business so that I never allowed more than that legal 10%. Maybe I was mis-reading what you wrote but it sounded like you were allowing 30%.


----------



## skyhook (Mar 17, 2007)

Add 10or 15% to the final figure of the contract in the beginning. If you can't collect the final payment, no worries.


----------



## Fence & Deck (Jan 23, 2006)

Mike Finley said:


> If that is the case I would make sure to change how I was doing business so that I never allowed more than that legal 10%. Maybe I was mis-reading what you wrote but it sounded like you were allowing 30%.


Actully Mike you are right. I am allowing 30%. This year out of all my projects I've only had a few that I've had a problem getting paid. It's those few who regard my contract as toilet paper that cause the aggravation.
For 29 seasons I always took 30% as a deposit, and the balance on completion. I guess I have to re-think what I'm doing.

It's just getting worse over the last 3-4 years.

One problem is that there are several deck companies out there, a few of which are actually pretty good, who, in their sales presentation, make a point of telling the client that they only take 30% and the balance on completion.
I know of one company who actually tells them that they don't take any money at all until the job is done.


----------



## Mike Finley (Apr 28, 2004)

I wouldn't get too caught up on those issues of payments. I've gone round and round on those issues myself, and after a lot of analysis, those things are minor. Customers are only worried about payment schedules when they aren't sold on the integrity of your company. If they are still worried about payment schedules after that there is something else going on.

Believe me those other companies are not taking significant market share from you soley based on their payment schedules. If that was the case companies not taking payments until job completed would be a prevelant marketing scheme.

We only take a 10% deposit but on 1st day due is usually 40-50% of the balance. I've had a couple of people say something along the lines of "But I'm going to be paying you 50% of the project and it's just starting?" to which I reply, yes, and I'm going to be carrying 30-40% of your projects costs in materials until your project starts 2 months from now...


----------



## Winchester (Jun 29, 2008)

The customer is allowed to hold back 10% here as well. That's in case the contractor doesn't pay his subs or suppliers to help protect you from liens. I'm pretty sure it has to be put in a trust of some sort, though... And only if the project is over $100,000

Don't quote me on any of this though. I'm no lawyer


----------



## Fence & Deck (Jan 23, 2006)

Mike Finley said:


> I wouldn't get too caught up on those issues of payments. I've gone round and round on those issues myself, and after a lot of analysis, those things are minor. Customers are only worried about payment schedules when they aren't sold on the integrity of your company. If they are still worried about payment schedules after that there is something else going on.
> 
> Believe me those other companies are not taking significant market share from you soley based on their payment schedules. If that was the case companies not taking payments until job completed would be a prevelant marketing scheme.
> 
> We only take a 10% deposit but on 1st day due is usually 40-50% of the balance. I've had a couple of people say something along the lines of "But I'm going to be paying you 50% of the project and it's just starting?" to which I reply, yes, and I'm going to be carrying 30-40% of your projects costs in materials until your project starts 2 months from now...



Good point about that Mike. Still, we are the home town for Mike Holmes ("Holmes on Holmes" and he constantly tells people don't give the contractor too much money.
I have not really had much problem getting my schedule agreed to.

Your schedule is 10% deposit, then 50% when you start. That's 60%. The balance is paid how?

With us, it's 10%, 30 % at start, then 30% at a milestone, such as decking installed, or some such, so we get about 70% during the job.


----------



## pcplumber (Oct 12, 2008)

Grumpy said:


> Why would you run a business as a sole propriotership anyways?
> 
> If I was selling you anything on a regular basis you bet I'd run a credit check on you (unless you were prepaying), and if you didn't want to give me the info I'd assume you had something to hide and I'd count my blessings before hand that you didn't run up your credit line then stick me holding the bag.
> 
> ...


You can find out more, about a person, by looking at their blogs and web sites. There are many ways to find a persons blogs, web sites, and even find posts in other blogs, etc., even when the blog is not theirs.


----------



## Any Season (Nov 19, 2007)

I go 15% at booking, 65% at significant completion, 15% at completion deemed by us, 5% for punchlist completions.


----------



## fez-head (Mar 15, 2005)

pcplumber said:


> spend more time writing the perfect contract and explaining to the customer, what they should expect. He may want to tell the customer that a fence will never be flawless and explain what can go wrong, that the job may make a mess of the plants, break pipes, cut power lines in half, etc., but he must explain that he will do his best to avoid collateral damage. This should be explained verbally and in writing. When you tell a customer what to expect, they rarely get upset.


This has helped us tremendously since we provide a Satisfaction Guartantee.


----------



## ultimatetouch (May 27, 2006)

Do not leave 30% as the final payment especially for bigger jobs. I leave about 5% because of human nature.

I will leave as much as 50-60% if its between 1500-2500 total job cost. I dont sweat it.


----------



## MikeGC (Dec 6, 2008)

*Your draw schedule is nuts - wakeup!*

I had the good fortune of getting jerked around on my very first contract ever when I was the age of 23 and my draw schedule was 50% 25% 25%. I am now 40 with 17 years in the biz.

My very accomplished father suggested I make my draw schedule much more aggressive. I took his advice and have had very few problems since that time. 

For contracts under $10,000 I get 50% to schedule the job first come first serve so we can get materials delivered to the site and pull permits. I get 38% prior to the halfway mark and 12% at the end. 

For jobs up to $20,000 I get 50%, 35% 12% and 3% on completion

For jobs over $20,000 I get 50% 25%, 15%, 7% and 3%. 

I introduce the draw schedule the same way every time 

"This is how I do business. It works very well for all parties with a sense of fairness and many opportunities to discuss our concerns along the way. There are many variables to every job and communication is vital between us. I expect you will bring your concerns up when they arise rather than wait until a payment is due to discuss it. I do not generally welcome lengthy discussion of concerns when a payment is due. I am always willing to address your concerns when they come up. Waiting until a payment is due to mention a number or prior concerns typically appears insincere to me making it look more like a stalling tactic for payment rather than a legitimiate concern. Do you have any concerns about my philosophy or payment schedule?" 

The answer is almost always no that seems reasonable. 

Do you have any other questions? 

The answer is typically no

Then I asume the sale and ask for a check and signature to get their rpejct scheduled and started. My close ratio after much deep qualifying by phone is very high generally over 65%

I look at every customer as a partner in a deeply satisfying endeavor that could instantly become a determined opponent grasping at flimsy nonsense with the upper hand because we are on their property and they control our access to the site. As soon as they get a mild tingling sensation that a pissing match is in order they might start their crap making all decisions on emotion rather than integirty, sincerity or fairness.

Many may think I am harsh but another mentor said to me many years ago the three rules of business are get the money, get the money and get the money. 

I do not get screwed out of money and my customers appreciate the frankly spoken agreement to work out our issues if and when they come up rather than as a bargaining chip for payment that is legitimately due. 

It is much easier for a customer to write a check without fear of ever seeing you again at the end of the project when it is for less than $1500. 
Make it easier for them to pay you and they will. Make the fight not worth it by lowering the draw amounts strategically to leverage human nature and the fears of loss or making a mistake lurking within it.


----------

