# Pay subs after customer pays?



## rtztgue (Jul 9, 2010)

I am curious to know how many of you, or how common the practice is to pay your subs only after (and if) your customer pays you. My office gal placed a call to a GC today about an invoice from March. She was told "we will pay you when the end user pays us" My thoughts are that is a bunch of crap. Whenever I sub to someone I pay in 30 days. I consider that money the subs not mine and it is up to me to get them paid and keep them happy. I usually get on the phone and rant and rave (usually politely) about the bill and let the GC know that collection from the end user is their problem and they owe us the money.

BTW. Ous sub jobs are usually a few thousand dollars here and there. Its a GC that needs us to install locks or perhaps an alarm system. So I am not talking about a million dollar remodel. Perhaps it is an out of state company with a client in our state that needs $1000 in service work.


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## MAD Renovations (Nov 18, 2007)

I structure my payment schedule for the HO's in progression payments and I also pay my subs in progression payments... ie. When the plumber and / or electrician is finished th R/I They get paid for the R/I, and when they finish the trim out, they then get paid for the trim out.

I would never consider holding my subs pay until I get paid unless this was a pre-arranged agreement.

In the big picture the GC hires the subs and is responsible for paying them. The H/O hires the GC and is responsible for paying him.


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## Chris Johnson (Apr 19, 2007)

This is illegal in many places. It is commonly known as the 'paid when paid' and doesn't fly in my books,

What's in your contract?


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## BamBamm5144 (Jul 12, 2008)

I pay may subs immediately following an approved inspection of their work, even if I haven't been paid by the customer yet.

I really only use gutter subs and by now I know they do great work so I usually just send a check the day after I get the invoice.

The I will pay you after I get paid crap just does not fly in my book.


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## 480sparky (Feb 1, 2009)

So if the customer never pays the GC, I gotta subsidize his poor business skills?

Three words:

No.
Freaking.
Way.

Let's say my work is perfecto. But the drywaller screws things up. Or the roofer. Or the plumber. Or the brickie. And the owner withholds payment. Why do I not get paid because of that?

If the GC is gonna play the Pay-When-Paid game, he's gonna find himself another electrician. I hear there's tons of starving sparkys on Craigslist.


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## thom (Nov 3, 2006)

I think Pay IF/WHEN paid is a poor business practice but it is not uncommon. Many subs agree to it so they're stuck with it. If you don't have a contract or if your contract says due if/when paid you are pretty much out of luck. 

Subs that will work for these terms are what create the problem. The crappy GC's are only in business because subs and suppliers will put up with them. The responsible GC's end up getting the short end of the stick.


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## MikeGC (Dec 6, 2008)

Pay when paid is not cool.

I wouldnt work for a loser.


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## griz (Nov 26, 2009)

Subs were always paid upon or before the completion of their work.
The subs contracted with me, not the HO. 
HO doesn't want to pay me it's my problem, not the sub.

I treated my subs very well and in return I was treated very well by them.


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## rtztgue (Jul 9, 2010)

Great to know I am not the only one that thinks this way. My terms are net 30 and when I get the story of "we will pay you when we get paid" I let the gc know that is not our terms. Of course trying to get them to pay can be a pain. But future jobs will be suspect and a lot of times kick these guys to the curb. I tell them to find someone else because I am not their financer. Or the other option, if I know they are good for the money, I will charge them more. If they ask for a discount I will ask them to pay with a check upon completion. They get a deal or terms... NOT both. That usually shuts them up. 

A lot of my deals are without contracts. They are small jobs that we submit a quote, they hire us and we do the work. In those cases our terms apply and our terms our on our invoices.


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## rtztgue (Jul 9, 2010)

So here is a another question. We do have one GC that has a payment term saying they will pay all subs within 10 days of receipt of payment by owner. Is it okay to touch base with the owner to ask if payment was made to the GC and if not, when payment can be expected? How would you do this without ticking everyone off. My thought is that if we cannot get a decent answer from the GC about when they expect payment or if they are keeping up on the owner, then it would be okay to politely call the owner, inform them you are a sub, and ask for a status update on payment.


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## RhodesHardwood (Jun 28, 2010)

I think the only people who do that are the ones that don't have the money to pay them out of their own pocket. I always like to pay right away. This way when the check does come the rest is mine.


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## holmesismyhero (Jun 6, 2011)

The sub has no control over the entire job, or the performance of the other subs. To hold back payment while other work is in progress is just wrong, and I'd find some new GC to work with, or get his terms changed. 

If the GC decides to take a risky job, and doesn't get paid or paid right away, that's his problem. Not the subs.


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## Framer53 (Feb 23, 2008)

First, I would like to say I have been on both ends of pay when paid. The only time I can remember it on my end was a larger than normal contract and I told the subs and told them if we all wanted the work we had to work out these terms. That being said, I did reach into my pocket and pay them when I had an owner take 90 days when it was pay in 2 week past completion mile stones. 1991 and still owed money on that contract.

As far as your particular situation, I would insist upon payment terms that are favorable to you when you accept the work order. In other words, ask when they offer the work to you how they intend on paying.

Now as far as contacting owners, I would do so in your case when it becomes over due.


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## Chris Johnson (Apr 19, 2007)

First off before contacting the owner several things must be considered.

What is the amount owing? Couple hundred bucks, a thousand, few thousand, ten thousand, 100k

How big is your local market? Are there other GC's that will hire you? Let's be honest, this GC isn't exactly going to jump into doing more business with you when you call his client and tell them you haven't been paid.

It's a fine line you need to look at. I have 45 days to place a lien so around day 30 I follow up with the GC and if anything feels out if place or doesn't jive to well with me I'm ready to lien about day 37.

I would contact the owner just before a lien is placed just to see what's going on, I never imply I'm ready to lien until I feel I'm out of options. For that is the only time I go above the GC's head


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## jimmys (May 1, 2009)

Your contract (implied if not written) is with the GC. You have no agreement with the HO. If you ask the HO if he's paid the GC, you're sticking yourself between them. Don't expect either to be pleased.
We don't use written subs' contracts either, but as GC I always think I owe the sub whether we're paid or not. Sometimes I have to let the sub know I won't have the cash until ***, but we try to schedule the payment schedule so we'll be able to pay subs.
Jim


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## larryb (May 23, 2008)

Always paid my subs the Friday after completion of each job - assuming each job passed my inspection. I started as a sub years ago and the above was the typical pay scenario. 10 days or when HO/cust gets paid doesn't fly, ain't right. Got to pay a man for a job well done - when it's done, not later.


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## bender_dundat (Feb 20, 2011)

Real easy solution. Call the GC and tell them you will be filing a lien against the Homeowner the work was performed for if you're not paid by such and such a time. I can't imagine trying to work subs for those types of terms nor can I imagine subs working under those terms. But it happens all the time. Too many people hungry for work. To be a GC, one should have the financial wherewithal to handle the cash flow. If they can't, they shouldn't be a GC period.


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## J F (Dec 3, 2005)

I always paid within 24 hours of completion for sub work. Of course as a GC, my contracts with h/o's always stipulated payment for each phase of construction was due _prior to_ the _start_ of that phase.

Life's so much easier when your working with the client's money...it's _their_ home and I'm not a bank.


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## eastend (Jan 24, 2006)

that's the point. Too many GCs want you to help finance their project. Maybe because of their poor planning , or they just want to hold the money in their account.I've had a few do it to me, even though my contract- which they agreed to- states otherwise. Had to walk a couple of times to motivate them to pay.
Tired of those games. I'm not a bank. We no longer work for those who play this way.


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## RCPainting (Jan 29, 2006)

How about when the funds come from a bank loan? My state, all subs file on an online registry (prelein) and the banks issue the checks directly to the subs after inspection.


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## MJW (Jan 27, 2006)

BamBamm5144 said:


> If we installed all our gutters and metal work ourselves instead of subbing it out to the aluminum guys, I would have not been able to do 8 roofs yet.


NOt trying to be sarcastic or sound like a d1ck, but..... 

Is that just because your guys are better at roofing than at metal work.

Maybe they'd appreciate a day on a shady wall doing some soffits for a day.


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## BamBamm5144 (Jul 12, 2008)

MJW said:


> NOt trying to be sarcastic or sound like a d1ck, but.....
> 
> Is that just because your guys are better at roofing than at metal work.
> 
> Maybe they'd appreciate a day on a shady wall doing some soffits for a day.


No they don't. I've tried it and all they want to do is roof.

I started up a second siding crew who does all metal and what not. Well only two guys but they are often on a project for a week or two while in the mean time I try to get 4-5 roofs done.

Are they better roofers than metal guys? Yup. Are they better metal guys than most of the work I see? Yep.

I used to be against subs and probably will never use roofing subs unless I'm in a jam but since I found the guys I use, life is more simple.

Either way, I now pay as soon as I get the invoice.


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## Jaws (Dec 20, 2010)

MJW said:


> True. As long as homeowners want cheap (low cost) homes, that is the way it will always be.
> 
> For home building there will always be subs. Specialty trades....I hope not.
> 
> Homes around here are not worth anything close to what they should be. $350K house is now $150K. At $350K these places were getting close to the price for a quality home, IMO.


What does.that mean, that a 1,000,000 truly custom home shouldn't be done.using subcontractors? JAW


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## MJW (Jan 27, 2006)

jawtrs said:


> What does.that mean, that a 1,000,000 truly custom home shouldn't be done.using subcontractors? JAW


Hey, if the budget is for low cost subs and low quality materials...what is it?

I've been a sub on multi million dollar custom homes. They still have a budget that is usually pretty tight. HO's rich or poor still want a cadillac for the price of a geo metro. Not all the time, but most are that way.

Rarely since the boom *here* in the 80's have I seen, what I call, a quality custom home. I can't comment on other areas as they can be decades ahead or behind where my area is at right now.


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## Framer53 (Feb 23, 2008)

MJW said:


> Who's going to pay?
> 
> Do you work as a sub full time?
> 
> ...


First I don't work anymore if you read my profile and intro you would realize I was severally injured about 5 years ago in an auto accident.

Those houses can be foreclosed on by unpaid subs if they had liened properly.

If a large company goes out of business then they deserve what they get. Kind of severe aren't I?

I went through this problem in the recession in the early 90's and know of what I speak.

Subs are a necessary evil if you like in contracting as homeowners as a rule do not GC most of their own projects. 

You sound like you have been burned, if that is the case and you are still in business be sharper this time. it is unrealistic for GC's to pay a dime for normal materials up front, only for custom.


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## skyhook (Mar 17, 2007)

Framer53 said:


> it is unrealistic for GC's to pay a dime for normal materials up front, only for custom.


I purchase my own materials and have them delivered rather than hand over front money. btdt 

My son coined a phrase, he said they "ran out of business". :laughing:


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## Jaws (Dec 20, 2010)

MJW said:


> Hey, if the budget is for low cost subs and low quality materials...what is it?
> 
> I've been a sub on multi million dollar custom homes. They still have a budget that is usually pretty tight. HO's rich or poor still want a cadillac for the price of a geo metro. Not all the time, but most are that way.
> 
> Rarely since the boom *here* in the 80's have I seen, what I call, a quality custom home. I can't comment on other areas as they can be decades ahead or behind where my area is at right now.


 I guess I don't get what your saying . I.know few.custom builders/remodelors who have in house labor force. A roofer is going to do a more proffesional install than a carpenter crew, and a custom builder has no reason to employ roofers, tile installers, wood floor installers, ect. We employ a lead carpenter and a paint crew, no plans.to have them hack up a standing seam roof. Maybe im missing something. JAW


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## rselectric1 (Sep 20, 2009)

As an answer to the ORIGINAL question, and the title of this thread.
*
No Friggin Way!*

My agreement with a GC has nothing to do any payment schedules between the GC and the owner. It's actually none of my business.

If I'm getting a taste of the entire job, it might be different but otherwise I will not finance a GC on his job.

When I am the GC, I go into the project knowing FULL WELL that I am taking the risk, not my subs. They get paid regardless. To set it up any other way would be asinine.

If a GC doesn't have the funding or cash flow to take on a project, then he just SHOULDN'T.


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## Jaws (Dec 20, 2010)

Btw, truly custom means truly custom. I don't compete in competitive bids for.new.homes, not to.say you can't be a custom builder if you do. We use quality materials and trade contractors. For.future reference, when I say custom, that means quality, built to exact specifications, with the occupant in mind, by a knowledgabe contractor. Low quality materials/trade contractors equals low ball or hack in my book. JAW


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## smalpierre (Jan 19, 2011)

GC hired you, GC pays you. Homeowner has nothing to do with it, and neither does whether or not the GC gets paid.

Try that with your lumber yard account and see how far that gets you. Better yet, suggest that the GC does it ...


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## App-ironworks (Sep 9, 2009)

MJW said:


> True. As long as homeowners want cheap (low cost) homes, that is the way it will always be.
> 
> For home building there will always be subs. *Specialty trades....I hope not*.


At the risk of going off topic, could you elaborate on this (the bold part) please. I'm not sure I understand your point.


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## tedanderson (May 19, 2010)

I'll be the odd man here when I say this but when work is slow and I am forced to take anything that I can get, sometimes I'll take a gig with a "broke" contractor who simply does not have the money to pay me until he gets his. 

I realize that there are a few greedy and stingy GC's who just want to delay and diffray the cost of paying the subs to maintain the cashflow and to be profitable.. which I STRONGLY DETEST, but there are many GC's who are just barely hanging on. They've budgeted enough money on the project to pay themselves and to pay the subs but they don't have any other funding to work with. 

Most times they make it clear to me upfront and then I can decide as to whether or not I can do it.


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## Framer53 (Feb 23, 2008)

Yes Ted, I know what you are saying and it is what I have been trying to get across.

As far as the rest of you, payment schedules are a matter of negotiation when you take a job. If you don't ask what terms the GC wants, you get what he wants when he wants.


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## dakzaag (Jan 6, 2009)

I recently bid a job that I was told to include material. This GC always paid material up front with me and 1 or 2 draws depending on the size of the project. 

Well, two days ago I get the message that I have to fund the material and labor for my portion of the job. Approximately $25,000 worth spread over about 6 weeks if the weather is perfect and more likely 8 weeks with typical delays. 

I don't normally do this unless it is a small job less than $1,000 in materials. I am not structured to finance the job and I didn't bid interest and risk into the price cause it has never been an issue with this builder before. 

The bank is forcing the GC to work these terms cause they say they have to protect against slow progress and someone not paying suppliers. This GC has an excellent reputation and does not drag out the building process. There are always delays, but usually a week or so, never month after month. The GC called me and left a detailed message about it and asked if I still wanted the job. (Not standard procedure for either one of us.)

I all ready have spent upwards of 50 hours helping the client stay on budget with their material selection and we are 1 day from ordering the brick direct from the producer. I called the owner of the brick company and explained that I am not structured to handle the material and labor for this project and he agreed to 60 days on the brick. 

I still question whether I should take the job, it is close to home and the folks are nice and I work often and well with the GC, but springing the payment schedule at the last minute didn't sit well with me at all. At the least I feel I should get interest on the credit I am extending the client. The bank is not functioning as a bank in my opinion, but they say it is normal business. 

Sorry so long, but this subject has hit real close to home for me recently. I guess my biggest beef is biding the job as due on reciept and getting paid net thirty after completion. I have no idea if exterior cladding is one of the trigger fund releases or if it will be dependent on other items being completed. I could be done and waiting for the plumber to finish the toilet installs before I get paid. 

The more I type, the more I think I know the answer I should give the client/GC.


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## Chris Johnson (Apr 19, 2007)

Dakzaag;

I think for you to do the project based on this new information you need to re-bid the project with an increase in price.

When they ask about the additional funds just tell them since the regular terms you normally have with the builder cannot be met you need to cover what it will cost you to carry them.

Something tells me you are so far into the project they can't switch masons at this point which would jeopardize the schedule and cost them even more in financing costs. You may also get a small draw immediately to cover your hard costs and still allow you to use TE credit extension from the suppliers for the balance. This may all work in your favor.


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## dakzaag (Jan 6, 2009)

I am not sure about any other masons, frankly I am probably defending my turf a little too much as I like doing work close to home. 

When they accepted the bid verbally several months ago, they stated that the budget was firm and asked me if I could hold the number that I gave them. I told them my labor price was solid, and it was up to them to select a brick that didn't blow the projections out of the water.

This led them to selecting a brick from a nearby house that they really liliked. Unfortunately the brick they selected was double the alotment in the estimate. I have been calling and searching high and low for a close second on color that is within the budget. Finally found something pretty close and like I said, we should order it on Monday if all goes well...just won't be paying for it til mid October is my guess. 

In the meantime the payment structure comes up and you read the whole thing. I agree the best thing to do is start with the change order right now and get it over with. The GC is pretty hungry right now, he laid off his whole team this winter for the first time since 1995 and he is tripping over himself to avoid a big hole in his schedule. 

I have work coming out my ears, but this is a good job and I want to do it, if I can work out favorable terms. I don't want to be the jerk who turns on the lights during a good movie, but the bank/client has changed the rules in the middle of the game and I see problems coming down the road.


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## griz (Nov 26, 2009)

Construction financing and ethics of many involved are going to he!! in a hand basket...

A large bank account or line of credit are becoming more common tools for a guy to need now days...

We are also going to need a line, when figuring Overhead, the monthly retainer of a hot shot attorney...

It still boils down to:...:thumbsup:

*Some jobs just aren't worth doing​*
Who has the tag line "I never lost a cent on a job I didn't get"


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## Chris Johnson (Apr 19, 2007)

You may be better off letting the job go, but I think they will come back to you with either faster payment terms or some up front funding.

The bank hasn't changed it's way in funding projects, the milestones are the same now as they were since I started. The biggest thing is getting the financing.

The other thing that makes me laugh is the budget. If they are tight on budget and cannot go over then they are building a house they can't afford. They should be building a house for 20% less then they qualify for so as they have room for changes and extras.

The more I write and think about this the more I'm now inclined to say walk away.


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## AustinDB (Sep 11, 2006)

I use to be a mason many moons ago and we did get a call at the 12th hour to take a 23k brick house, decked with extras too. I'm sure there are enough crews out there that will take the work in these tough economic times even some of the big boys stepping up to carry the costs. 

tough decision-good luck. It's definitely worth more than the original bid, having to carry all the additional costs AND it's your neck on the line if things go tits up and the brick supplier comes after you for the materials!


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## dakzaag (Jan 6, 2009)

I would be fine to own the house, but location isn't what I would call ideal for me. The brick expense I could absorb as I would reclaim them. It is the labor that would send me down. The last two years have been scratch and claw just to survive. This summer is the first time in three years that I have been able to build a little buffer. 

The bank claims I will get paid no matter what, I am concerned the worse case scenario would be 2 years later when it clears bankruptcy and I get 20 cents on the dollar.

Not wanting to hijack this thread, but I guess it is similar in how we get paid.


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