Customer not paying for building work?

There are many reasons not to pay.

 

Bizarrely, on a personal basis, and even now, very few of us are comfortable in not paying for a bad meal or taking something back and asking for a refund. We are getting better at doing so, without giving offence, but personal situations differ greatly from what happens in business! Tough businessmen use their suppliers as a source of free credit and, if the relationship is not “essential” defer payment for as long as they can.

 

“The customer is always right” is often used as an excuse for non-payment but this is incorrect. It generally covers the situation where because a customer does not like what is on offer, is bored with it, and/or has found another alternative. Tastes, fashions and attitudes change, and customers vote with their feet, wallets and purses.

The only real reasons not to pay are;

  1. They customer has no cash and “can’t pay”, or
  2. The customer has a genuine grievance about poor quality goods or services or a general dissatisfaction with the working relationship – “won’t pay”.

“Can’t Pay” can, perhaps, be avoided to some degree with regular credit checks on customers and a cautious attitude to extending credit terms. Every business has, at some stage, been hit with a bad debt due to the failure of a customer and credit insurance usually carries a cost and a need to stay compliant with its terms.

 

“Won’t Pay” can, to a larger degree be mitigated by the correct use of trading terms and documentation – signed time sheets, proof of and, satisfaction with, goods on delivery are means to defeat arguments not to pay.

 

The construction industry is difficult, but the best chances of recovery come where the paperwork has been kept efficiently and measures and satisfaction documented by site meeting and confirmed by e-mail. The chances of the recovery of debt reduces where a business has been “played” by its customer. Quite often “variances or extras” have been requested and agreed verbally and, when it comes to the end of the contract, the fun really starts. All variances need to be instructed in writing. Ambiguity, slack practice, over-reliance on trust, or hearsay are all the enemies of timeous payment.

 

In almost all cases, where a business fails to complete contractual work and there is a counter-claim;

 

  1. For poor work (which can be mitigated as suggested above) and
  2. For additional costs and expenses caused by the failure of the contractor to complete.

 

The latter reason would indicate that the payer has the upper hand but it is up to them to account for their counter-claim with the supply of supportive evidence of delay, caused by the failure to complete, and for any additional costs of completing the job.

 

In our nine years of trading we have successfully challenged and defeated spurious claims showing, in several cases, the production of fraudulent paperwork in an attempt to escape liability.

Summary

  1. Check your customer’s credit “objectively”;
  2. Make sure you have proper terms agreed:
  3. Make sure you get your delivery, or work, signed off at the time;
  4. Have any counter-claims professionally assessed.

 

The customer is not always right!

Request more information on Outsourced Credit Control or a FREE, no obligation APPRAISAL OF YOUR DEBTOR BOOK.

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