5 reasons you are statistically less likely to be paid in full (or at all) if you delay chasing payment
5 reasons you are statistically less likely to be paid in full (or at all) if you delay chasing payment
Nobody in their right mind likes calling a client about an overdue invoice. But there is a bizarre phenomenon that I’ve witnessed in even the smartest of folk, where they get awkward and strange about having the “my money is late” conversation.
Look, I’m not immune to this. Even I (the fearless debt recovery consultant) have been known to put off calling clients about my overdue invoices because I did not want to have the uncomfortable conversation.
Thankfully, I learn fast, and I only let this happen a handful of times before I got my ovaries out of my handbag and separated my feelings from my business.
You see, if I can’t walk the talk, how can I expect you lot to trust me to take a run at your money?
In all my years of doing this work, I’ve observed a lot of humans who haven’t been paid, and I can tell you with certainty that the longer you take to chase your money, the less likely you are to recover it all (if any).
Here’s why:
- If you wait to chase an overdue invoice, the builder will know you’re willing to wait, or at least, that you don’t know what to do about it.
You might be thinking that your builder wouldn’t be that bold, or that he’s not that strategic, but here’s the thing:
I once worked for a building company that financed its entire accounts team on unclaimed retentions.
I was so outraged the first time that I heard this that I raised it with the General Manager, and he said this to me:
“Michelle, nobody is claiming this money. If they do claim it, we pay it. But until then, why would we chase them down to pay their retention out? Some of them aren’t even trading anymore and the other ones have either forgotten about it or they can’t get their act together to give us an invoice. Whose fault is that?”
I’d love to know what you think in the comments – whose fault is that?
I’m not saying the builder is blameless, but what I am saying is that you can’t expect a commercial entity to automatically make payments to you. Life just isn’t that fair.
But the principle is the same: if you delay chasing payment your builder will know you can wait, or that you can’t figure out how to chase your money.
2. If you wait to chase your payment, you are giving your Builder time to dream up a reason not to pay you at all.
How many times have you been just about to give your final invoice on a job and a defects list drops?
Or worse, you give the invoice, its not paid, and when the next month comes around for you to claim your next progress claim you don’t know whether to re-claim the unpaid amounts or whether to assume they’ll come late.
In either alternative, you’re giving your builder a free kick. A second bite of the cherry. His cake and letting him eat it too…
3. If you wait to chase your money, the Builder’s cashflow moves on and chances are, so will yours.
In a perfect world everybody is cashflow forecasting and they know what money needs to go where, and when. But in the construction industry that’s fairytale land.
If your builder is delaying paying you it is likely due to cashflow issues. If you aren’t the squeakiest wheel, someone else’s wheel will get the oil.
You simply can’t let that happen, because once that water is under the bridge every month after that the builder has to find money for you in a short fall.
Speaking of short falls, you’re now running your business on half a tank (if you’re lucky) and your financial capacity to pay for help to chase your money is quickly dwindling.
The longer you wait, the more the domino effect will ripple through your business. Less money for staff – less staff to do the work – less work to bill – less revenue for cashflow.
Soon enough you too will get weary of the fight, and you’ll give up. Or you’ll compromise on a smaller payment to end the misery.
And that my friend is why if you wait to chase your money you’re statistically less likely to be paid in full, or at all.
4. The longer you wait to chase your money, the more comfortable the Builder gets with that awkward conversation.
The first time you call the Builder he’s likely to feel most uncomfortable at that point in time. If you both dance around the subject you’re missing an opportunity to leverage whatever good bloke is in him.
As more time goes by, the Builder will become accustomed to the awkwardness and he will have had time to dream up better excuses, or to find bull$hit reasons you’re not owed the money after all.
If you let enough time pass, the Builder will start to see you as collateral, and he’s likely to scratch you off his friends list. I’ve heard this with my own ears on many occasions from different builders: “This guy is never working for us again and there is no point burning another subbie to pay this guy off. Just kick the can down the road as long as you can until we have no choice but to pay.”
It sounds dramatic, but when a builder has no money to pay, these are the sad decisions available to when it comes to deciding who to pay.
5. The longer you wait to chase your payment, the more likely the person you have the relationship with will move on, or their circumstances will change.
This happens way more often than you think. If your relationship is with someone on the builder’s payroll, chances are if he’s not made redundant, he’s likely to flee the sinking ship.
Another situation less common but has happened to a client of ours recently is that the staff member that everyone was relying on to approve variation payments just got a promotion.
Two months ago she was a lot friendlier and everyone thought she would come through with the goods. But back then she was responsible for site activities and now she’s responsible for budgets and rubbing shoulders with management.
Who do you think she’s siding with? Not my guy, I promise you that.
The longer you rely on these relationships to get you paid the less likely it is that the person you have your trust in will still be in a position to get you paid.
If these 5 reasons aren’t enough to convince you that you’re smarter to chase your money sooner, consider this: Australian laws that exist to help you get paid have strict timeframes that you need to adhere to. If you don’t take action, you risk becoming time barred from utilising them.
What processes are you going to change?
