What to Do when a Customer Won't Follow Through

      and what can you do then? Here, cabinetmakers consider the case of a builder customer who won't take delivery on cabs for his own house. September 8, 2007

Question
I recently completed (in January) a custom kitchen project for a local builder. I am having a problem getting him to take the project. He has seen the completed cabinets and says they are acceptable. I won't deliver until I get final payment. He says he can't pay until he gets payment from the homeowner. Now he has stopped returning my calls. Can I consider the project abandoned and sell them on the open market? Any suggestions?

Forum Responses
(Business and Management Forum)
From contributor H:
In recent years I have been in your position a few times. There is more going on than you know. Contact the homeowner directly. Tell them their product is ready to be delivered and installed but the builder will not make payment. If you know the bank they are working with, contact them also. I have had banks pay me directly, by passing the builder, in order to protect their asset (the home loan).

Some builders, not most, over extend or under bid and they get us caught in their web. It may be embarrassing and may make the builder mad, but he will, at some point, get cabinets for this job somewhere. Action on your part to circumvent him will make it harder for him to do this.

P.S. In your contract, state that your payment schedule is not dependent on bank draws.



From contributor T:
We had one similar to yours last year. The homeowner was the contractor. I did just like contributor H says - I went to their bank and they were very happy to work with me and get it done.


From contributor F:
I'm back to working on a kitchen for a builder's own home (2/3 done). I started on it 4 months ago. His current home isn't selling, so this home he bought to move into has been put on hold. He's very reluctant to accept the cabinets as he's too busy to mess around with this home he bought. He has a lot of space in this empty home to store the cabinets. I believe he's over extended and tight on money. He does have a tour home that's pre-sold that he wants cabinets for also, and he wants them started very soon. It's been a major drag on my shop having it full of cherry cabinets, no new payments, and nowhere to put them.

This stuff is typical here in Oregon. I believe the worst contractors all live here - they talk the talk, but don't walk the walk. These guys make some really decent money, but take too many vacations, buy too many boats, overpriced trucks, toys, toy haulers, quads, you name it. My wife and I are starting to take real estate classes. We're going to slowly change course. I'll still build custom cabinets, but I'll only take the jobs I'm interested in and not deal with the builders in the future. Nice thing about real estate is there are laws on the books that insure that when a house closes, checks are disbursed to all parties. Not so with cabinetmaking - we are always at the mercy of dishonest builders. We need some banking and escrow laws written to protect us and other subcontractors from this reluctant dishonest trade (general contractors).



From contributor T:
Sometimes dealing with contractors is like being a proctologist.

Used to be in Rogue River, Oregon - now in Montana. You have to weed them out here too.



From contributor D:
I have been in cabinetmaking for 30 years and one thing I have learned is to stay away from most builders. We changed our philosophy early and about 90% of our work is directly to the homeowner. It took a little longer to build the business up, but in the end I have only had 2 people renege on a contract in 30 years... and they were both in the building business! Builders in general are not the most scrupulous lot. I would avoid them whenever possible and deal direct with the people who need your product. Everyone seems to have the same attitude that they will get a lot of work dealing with the builders, which is true, but it doesn't matter if you don't get paid for it.


From the original questioner:
Thanks for the responses. This guy has already paid for two thirds of the job and I still have the cabinets. I agree that not dealing with contractors is bad business. This will be my last.


From contributor K:
First off, where is your contract? Second, you did get 50% as a deposit, didn't you? Third, don't do a thing on another set of cabinets until you are 100% cleared up on the first for this builder. You don't need his business that bad.

I've been down that road with contractors before, "I can't pay you because I haven't received payment from the homeowner." No more. Now it's 50% upfront, no exceptions, the remainder upon delivery and the install fee is the only part held until the punch list is done. It's working for me and my cash flow is much better. You cannot be badgered into relenting on this. Those that balk would be the ones that would probably give you trouble in the long run. So you say, "well, that deposit can be a large amount." Yes, it can. I have received 6 figure deposits before and am darn sure glad that I did, otherwise my cash flow would have been negative during the construction phase of the project. Just do it! When they have money invested in the project, they seem to be more able to get things done. Go figure.



From contributor S:
Here is a "cut and paste" from the terms and conditions (aka, the fine print) of our contract that specifically deals with delays. This may look/sound like overkill, but it clearly spells out what will happen in this case. The extra monies billed/collected could be applied to renting climate-controlled storage space at a local self-storage. This would make room in your shop for other work. By the way, be sure that your insurance covers the finished goods at the self-storage.

"Storage and handling charges will be applied to any and all projects undeliverable for more than 5 days after a delivery date has been set due to delays caused by the real property owner, architects, interior designers, contractors, service people, vendors or any other source not including subcontractors, vendors, and suppliers hired or paid directly by [our company]. Storage charges are assessed at $2.00 per lineal foot, per day, 7 days a week. Handling charges are assessed at $75 per hour. [our company] reserves the right to charge for storage and handling at any point during the fabrication process, beginning upon delivery of raw materials, due to delay by customer/customerís representative. Charges will apply until projects are delivered or fabrication has commenced/recommenced. Rescheduling for delivery or fabrication will be dependent upon [our company]ís workload at that time. Charges will be invoiced monthly and will be due prior to delivery or installation of any projects. Projects delivered to a site and not installed due to delays by others will be subject to full payment minus the cost of installation as determined by [our company] at its sole discretion."



From the original questioner:
Thanks. I will make this part of my contract.


From contributor O:
As a builder in Oregon, I am a bit bothered by the broad generalizations in this thread. Not all builders are hard to deal with. In my experience, the problems are usually due to a lack of communication. As stated above, that communication starts with a good contract. Get your deposit, stay in touch, with the builder throughout, and hold everyone to their contractual obligations.


From contributor B:
You have a right to be bothered, and these generalizations are far too frequent on many of the woodworking forums. My experience has been that many of the problems with builders are self inflicted, and as you stated, that comes from a lack of communication, and poor documentation. I have worked for some of my builders for over 15 years, and the majority are not just business associates, many are my friends. I frequently eat lunch or dinner with them, and play golf from time to time with all of my builders that play golf. All my builders pay on time, most take advantage of our early payment incentives.

I think it is completely off base to paint all builders with the same brush. There are good builders and bad builders, just as there are good cabinetmakers and bad cabinetmakers. It would be interesting to see if the distribution channels that feed products to cabinetmakers would say the same types of things about cabinetmakers.

Earlier in my life, I was an independent sales representative for a regional hardware distributor, and we had great cabinetmaker customers, and we had many bad cabinetmaker customers. The thing that bothered me the most is when they would say they had not been paid by their builder, and so they could not pay me. In my opinion, a cabinetmaker who does not have the ability to have and manage their own cash flow is not worthy to be in the business. I feel the same way about builders; if they have to get a bank draw to pay me, then we do not work for them (they are the bad builders).

Business skills in our industry are just as much a part of the skill-set needed for success as any of the joinery methods, or any other skill required to manufacture cabinetry.



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