Playing Hardball over Unpaid Invoices
Today I will not show up on an install because I have two invoices (one 4+ months and one 2+ months old ) out unpaid to the contractor.
Where I feel I may be in the wrong is that I said as late as last week that I will do the job, knowing full well that if I have not seen a check by then, I will not show up. I asked for payment several times last week and invoiced again as well as left a voicemail yesterday asking about the payments. I never specifically told the contractor that I would not show up if no check was produced.
I will be getting an irate phone call today as this is a commercial job and a pressure schedule. I would like to know the best way to handle the phone call as now I will finally have their undivided attention. I want to come off professionally but make them realize that they can not walk all over me forever.
Now that you have decided to go the no show route, do not argue with the guy, let him rave and rant and keep your cool. When you get a chance to speak, tell him "I am more than happy to work for you. I thank you very much for the business you have given me, but it seems you are having a problem fulfilling your payment promises for past work. I would greatly appreciate it if you could make those payments so that we can continue working together."
Whatever you do, don't argue with the guy - it will make a bad situation worse. If he continues to rant and rave, just tell him "I think it is best if we can talk when you are less upset" and hang up.
From contributor O:
"I never specifically told the contractor that I would not show up if no check was produced. "
So, why did you do this? Were you hoping to force him to pay by letting the scheduling pressure build up before you sprung this on him? I don't think that's likely to help anything. Why didn't you say something like, "I'd like to keep working with you, but I can't do any more until you pay me for what's already done."
I think you need to be careful not to focus on your interpretation of what's going on ("I feel like my effort and good will are being abused") and just focus on the facts - payments are past due, and you will not do any more until payment has been made. Facts are indisputable. Interpretations are just going to get egos involved and make it into a pissing match.
From contributor K:
While I agree with the others that you should have shown up and then addressed the payment, at this point, I would handle this as follows:
"Mr. Contractor, I have been trying to get your attention on invoices that date back as far as 4 months, with the latest efforts being invoices sent last week, phone calls made, and a voice mail yesterday that went unanswered. I honestly didn't know what else to do to get you to realize the severity of the situation. This needs to be resolved. I cannot continue work on the project until at a minimum the invoice that is 4 months old is paid in full, and a date is provided when I can expect the payment. While I have enjoyed our working relationship and appreciate the business, I have payroll and expenses just like everyone else and waiting 4 months to get paid does not work going forward. So, I will be there tomorrow morning, and if there is a check for the full amount for the 4 month old invoice and date when I can expect payment for the 2 month old payment, we'll put this behind us and get back to banging it out, because I know you are under time pressure. If not, I am left with no choice but to pull out, which I don't want to do. I can also stop by today and collect the check, so we can start first thing and make up some time lost from today. Which works best for you?"
If he balks at that, he either doesn't have the money (which means you shouldn't continue working without getting paid) or he doesn't give a rip (which means you shouldn't continue working without getting paid).
Whether it is commercial or residential, realize that you have payment terms for a reason. If what they agreed to is 30 days, it's 30 days... but once that time period has passed, then is the time to address it. If you are working with them, the grace period you provide must be met or you stop work until it is. Otherwise, you will continue to find yourself with 4 month old invoices.
From the original questioner:
Interesting. How long would you let the invoices go late before something like this? I could have filed liens on the other two properties making a much bigger headache for the contractor. I really don't see how this will change unless subs refuse to get walked on. I will continue to be taken advantage of until I draw the line and stand on it. I honestly don't care if I lose this contractor's business because if it's not mutually beneficial, I do not want to work with them. You create your own future and I refuse to be involved with this type of person for a moment longer. The point about keeping emotions and egos out of it is well taken. But let's be real - how many invoices must be sent and phone calls made before you just don't keep going along with it?
From contributor R:
These other guys are much more merciful than I. Heck, if I understand right you started a job two months ago when he already owed you two months overdue for a previous job. So I would have done this two months ago. I'll go above and beyond for you... But I will be paid!
From contributor J:
To the original questioner: I am sorry but I cannot agree with you. You are the one who let this situation get out of hand by not being firm in demanding payment. I would have sent an invoice stamped - if payment is not made within X days I will start lien procedures.
Four months later you are upset because they blew you off? Sorry, but it is your fault for letting them get away with it. Then you do another job and now another? You know the saying - fool me once, shame on you, fool me twice, shame on me. Didn't you get the hint that when the first payment did not come through after two months, maybe you were going to have problems collecting? Yes, you were taken advantage of, but it is partly your fault.
From contributor G:
Had the same thing happen to me and I refused to show on a job after telling them (their salesperson - my contact) I wasn't going to be there unless I was paid for prior jobs. At the time, they owed my $2500.
It made matters worse that they didn't believe I would no-show and were there to calm a frantic homeowner and address her concerns. Made them look pretty bad when I didn't show, but they took it out on me (and would stare blankly when I asked "When can I expect payment?"). Back charged me for made up stuff and ended up stiffing me for $1200 (after we'd had a couple of meetings about my charges). I suspect they would have stiffed me for the whole lot if I didn't have some cabinet parts from another job that I "traded" for their agreed upon final payment.
I'd already decided that I wasn't going to be working for them when I took this course of action. Pity we can't all get along.
From contributor M:
One of my big things is to Not Be A Victim. That means getting approvals, getting signed change orders, and communicating well. I wouldn't just not show up. Give written warning of their default and give a timeframe to correct it. Then take your next legal step. All that should be spelled out in your contract.
From contributor O:
I'm reading the book "Crucial Confrontations: Tools for Resolving Broken Promises, Violated Expectations, and Bad Behavior," and it is all about handling situations like this one. One thing it recommends you avoid is the pattern of reacting to someone's bad behavior the same way every time. The book calls this Groundhog Day, after the movie in which Bill Murray finds himself living the same day over and over again. When you keep sending invoices and doing the work without pay, you're setting yourself up for this sort of pattern.
As an alternative, they recommend the first conversation be about the immediate problem, e.g. "Payment on that job is due and I haven't received a check." If the problem persists or recurs, the next conversation is about the pattern you see developing, e.g. "I'm concerned there seems to be a pattern of significantly delayed payments." If the problem still persists, the third conversation is about the relationship, e.g. "I'm concerned that I can't trust you to pay me when you say you will, and that threatens our working relationship."
Later in the book, the authors specifically address the problems inherent in inflicting pain (e.g. putting the contractor in a difficult spot by not showing up when you say you will) in an attempt to force someone to behave the way you want them to. This sort of chest beating damages relationships (notice contributor G's story above), and tends to make the other party want to resist you instead of working with you to solve the problem. In your case, you've also damaged your own credibility, since that contractor can no longer believe that you will do what you say you will.
There's a lot more to it, and I'm only halfway through the book. But you might find it helpful.
From contributor U:
I don't think there is any better way to handle this than contributor K's response. No threats involved and a perfect resolve for both of you to get the job finished, and you get paid, hopefully.
From contributor A:
Not showing up with no warning is the nuclear option. When you do make contact with the contractor, make sure you demand payment for the current work as well before you start, or you will never see it. And then cross that guy off your client list. He'll probably never call you again. You let this get out of hand, and it's going to get ugly. You are going to get one bite on this apple - make sure you get every dollar they owe you.
From contributor S:
In the construction trades, whether you are a cabinetmaker, flooring installer or painter , the whole system of payment is flawed. It always has been and I fear it always will be. Starting with the client, architect, designer, general contractor, subcontractor, sub of a sub , etc. Each one has another one financing a portion of the job for them. If any one person along the way doesn't perform, or supply the appropriate funds when needed, it starts a snowball effect that threatens to bring down the house of cards. We have to deal with deposits, progress payments, final payments, and hold backs. If any of those payments are not met, you are put in a position of not being able to meet your own obligations.
If you are doing a big commercial job that takes 3 to 6 months to complete, you usually have 30 days to pay for materials. You have payroll to cover along with all your other business expenses. When you are finished, if you give them 30 days to pay, that is a huge gap between pay days. It often ends up that the little guys are financing the big guys and then are told they have to wait to get paid. I don't know what the answer is , but on a daily basis you see what hiccups in the system do to people.
If you buy a car, a house, or any other big ticket item, you have to pay first before you take delivery, or at least have the arrangements in place.
From contributor E:
I had a customer who always paid - with bad checks. Since we used the same bank, I started asking before I negotiated them. Then I started raising my prices, demanding cash, and ultimately, they went out of business - I was not the only sub they were maltreating.
The main thing is - don't let it drag on for months. I am not a bank - I cannot finance someone else's business.
From contributor Y:
I wouldn't do any more work for him. Why would you, to not get paid again? Putting the blame on the questioner is ridiculous. Yes, you were taken advantage of, but now is the time to put your foot down with this guy.
From contributor C:
You have two choices - continue to carry this idiot or not. It's hard to break the status quo, but when you are working on 120 days and 60 days, you have to ask, "Am I throwing money and time away that can go towards another productive paying client?"
I had a conversation today with the shop crew and explained we are going to go after more residential and commercial work with the direct customer so that we can improve cash flow and take the "pay application time lag" out of equation of our cash flow needs.
When a banker looks at your books any given day and you show multiple clients out of their norm of 60 days or older, the majority will state "you aren't getting the money" and they don't look at it as viable accounts receivable. Right or wrong that's how they see it.
Apparently, you need the money. We all do. Somehow, some way you have to get off the merry-go-round of being the bank. Just say you can't carry them, period. You are not at fault - you just need to negotiate a viable solution.
From contributor N:
I've only done one big commercial job, for a deadbeat GC of course. I won't do another. I hounded these guys for months for a check, but just the threat of a lien got money in my hand. Don't hesitate to use it. It's your right when dealing with these guys who want you to finance their business.
From contributor W:
You didn't say how much. First talk to an attorney. A project over 4 months old with no payment doesn't sound good.
From the original questioner:
I just got home from the job. Job is done and here is how it worked out. It was a small job, about 100' of p-lam countertops.
I waited for the phone call and told the contractor this. "I have made every attempt to collect this money even as recently as yesterday and have seen no results. I do not have an unlimited amount of resources, so I have made the decision to preserve the resources that I have to service customers who are able to keep their accounts paid up. I will be happy to service you when your bill is paid up. I will then be able to treat you with my prior level of service. "
I was told to come by and pick up a check. I went to their bank and verified funds. Then drove to the job after lunch and got it done.
I have created a form letter laying out expected timeframe for payment (as stated on my invoices). As well as the levels of action versus time delinquent that I will be taking in the future. I have e-mailed, faxed, and mailed this letter to each of my contractors and now have put forth a written plan of action for any future late payments.
That should weed a few of them out, so I better get looking for some new customers! Thanks for all the responses. You guys are the best.
From contributor V:
Did you get paid for the PL countertops or did the cycle get started again? I probably would have wanted payment in full not only for the past due jobs, but also for this job because of their payment history.
From contributor L:
Dealing with general contractors is apparently the same everywhere. I long ago made it a rule to never again work for a GC that lied to me about payment. That sure cut down on the number of GCs I work for!
From the original questioner:
No, I have not been paid for the P-lam tops yet. I put them on 30 days net terms. And the contractor knows now that my lien will be filed on the 60 day mark if not paid in full by then. At least they know what to expect in no uncertain terms.
I have had great results with liens before. Was paid in two days on a 27,000.00 final payment that was 5 months late. I find that I have a level of comfort if the place where I am doing the work is a nationally known business, as they usually don't want the bad publicity from it.
From contributor X:
What state are you in that allows you to place a lien on a commercial project after 5 months?
From the original questioner:
In that particular case it was the pressure of an expose on the local news and our local consumer advocate that got the job done.
From contributor Z:
The real problem here, as I see it, is that the contractor doesn't have the money. Not meaning to be too crude about it, but your problem is to get paid before the rest of the list of creditors, some of whom may get stiffed entirely. Being firm or tough or whatever the crowd wants to call it won't necessarily get the job done, as it calls for shrewd ahead of angry. You need to meet with this contractor and try to find out what is going on before it gets to chapter whatever.
Contractors are notorious for commingling funds from different projects and going broke gradually. You'd like to be in the office the day he gets his advance on the next job. I would meet with him before you sink anything more into a foundering ship. And I would be very cautious going forward.
From contributor B:
Real simple. If you're going to wait for the call, then play dumb/smart.
"Oh I'm sorry Mr. Contractor. I didn't realize you were still in business. I thought maybe you were not because nobody has returned my calls, emails, faxes, etc. regarding payment on the work I completed for you. I would love to continue working with you. However, we have to get your account current before we can get you back on the schedule. Would you like to make that happen?"
From contributor H:
Liens are good but only to a point. Last year I had a contractor that was using the excuse that his client didn't want to pay him for a change order or the balance owed on the cabinets. I told him to tell the client I would file the lien on Friday. He said he had and they responded they were never going to sell the house and since they were paying cash, they didn't care. I told him to also notify them I would place a judgment on/against their credit. This got the immediate response of a check.
From contributor K:
First of all, the assertion the situation is somehow your fault is ludicrous. That's akin to saying it's your fault for getting burglarized.
The foregoing said, it's time to take steps to correct the situation and protect yourself, which includes stopping taking steps that make it worse. You haven't been paid yet - why would you be paid for future work?
If this guy is in a position where he can't pay, he may be headed toward bankruptcy. As a sub, this would, essentially, place you in the position of both loaning him money and settling for a payback of pennies on the dollar. At this point, I agree with the "show up, call up, and set the terms to start" approach.
Would you like to add information to this article?
Interested in writing or submitting an article?
Have a question about this article?
Have you reviewed the related Knowledge Base areas below?