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Re:What do you do when clients try to avoid paying? (0 viewing)
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TOPIC: Re:What do you do when clients try to avoid paying?
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What do you do when clients try to avoid paying? 3 Years, 8 Months ago
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Hi Everyone,
I just joined this forum. I'd like to help my husband find answers and info to improve his contracting business. Here's my first question. I'm sure people have talked about it on this site but I couldn't find a post/thread about it.
What do you do when clients try to avoid paying the full amount, or they try to avoid paying at all? This sometimes happens to my husband Brian.
It seems that clients use different techniques to get out of paying. They stall. They cry poverty (if they couldn't afford the work, why hire someone...?) , or they find one nitpicking imaginary flaw after another.
Brian does great work (I've seen some of the projects and a lot of before and after pictures), and gets a ton of repeat business and referrals, so I know that when clients use nitpicking criticisms about the work as an excuse to pay less, they are lying.
Brian is a gentle guy (I call him the Gentle Giant). He really cares about his clients and puts 300% of himself into doing good work, on schedule. (I should know--my daughter and I are the ones who get less of him when clients need more.) Also, he knows he charges too little.
I know what I'd LIKE to do to clients who take advantage of my man's honesty and integrity and niceness. Put a shotgun in their face, twist their you-know-whats in a vice... among other things. But I don't know what Brian should do, that would be effective and not land him in jail.
What do you do?
Thank you!
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Problems getting paid 3 Years, 6 Months ago
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I have been in buisness for 11 years and have had only a very few problems. We prevent cash flow problems by making sure that our contracts have regular progress payments and proper legal wording that warns the client of the repercussion of not paying on time (work will STOP). On my fixed price contracts, I have only had three or four clients who gave me any grief about paying, it has been on the cost-plus projects that I have had the most problems, therefore, I do not do cost-plus remodeling anymore. I would say that the most important thins is to evaluate the client in the pre-contract stage of things and determine if you really want to work for them. If they are difficult or argumentative before you sign a contract, think about what they will be like when you are tearing their house apart. Best of Luck.
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Re:What do you do when clients try to avoid paying? 1 Year, 7 Months ago
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Hi. First off address this upfront with standard clasues in your contract document. Ask your lawyer to draft your contract, and the standard clauses will be similair to: customer responsible for any collection charges, lawyer fees, court costs, or any other fees involved in an attempt to collect payment.
Customer will be responsible for a 1.5% interest compound per month (or the maximum allowed by law) on any late payments.
Next spell out a time line for payment and always try to get a down payment. never work more than 2 weeks without getting a progress payment, and if you don't get your progress payment stop work immediately. You may also ask your lawyer to add something into your contract about stopping work and how you'll go to another jobsite and won't come back until the other job is done because you can't be bouncing around from job to job.
Now write a formal collections policy and stick with it!!! Usually sending a finance charge is enough to be paid. Then if not file a mechanic's lien on the property to protect your rights.
A very detailed contract including a scope of work eliminates many problems, but you'll always have some nit pickers. However you can refer back to the contract...
Mr. & Mrs. customer I did everything the contract states and more. I really want you to be happy with the work I've done, but what you are asking is additional and as such I'm going to have to ask you for additional comepsation.
That usually puts an end to the nitpicking because they know you don't play games. But you need a well written contract including a very detailed scope of work and all materials to be used, or you'll be powerless to argue later on.
If you say he's too cheap, that means he's also probably really busy. Tell him to raise his rates. There is a nice balance point where you work less but make the same money. You won't get the cheapo customers who are typically the biggest PIA customers also. He'll have a better quality of life and be able to spend more time with his family.
I raised my rates by about 50% last year, part of that was due to material price increases but I also jacked my profit too! Our volume only went down a little bit and we had our most profitable year ever. We sold more in terms of dollars but sold many less jobs. So the moral of the story is even in this supposed economic down turn, I was able to extra maximum profit by providing first class service and was still left with time for my family and friends. he should try it, I bet he'll be suprised.
My last words of advice, If he's not earning at least $100k a year he should be raising his rates to achieve that goal. I will preface that by saying, I haven't made $100k myself, but I was damned close last year and expect to do it this year.
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