Practical Completion And Getting Paid

Not getting paid for your labours is one of the most common enquiries I receive.  Probably eight out of ten enquiries involves complaints about money, and how to get customers to pay in full and on time.

I have written in previous articles regarding Professional Non-Payers and problems with extracting payment from those who do not wish to settle their account. There seems to be an ever increasing number of instances where even straightforward projects are subject to payment issues.

It may be significant that most of the complaints involve small firms. I can only imagine that customers are more wary of larger companies, who are more likely to have robust procedures in place, and be less prone to intimidation.

I feel the problems are wide and varied. The solutions are simple if correctly implemented.

First of all, it is extremely important that you ensure that your Standard Terms and Conditions are in place, and that they are fully comprehensive. They should cover every aspect of the contract, including identifying the name of the person responsible for payment. Not simply Mr and Mrs (or whatever), but actual names and a statement to that effect.

The Terms should be standard, at the same time they should be bespoke to that particular site. Do not pick and choose elements of your terms, leaving some out as they do not appear to apply on this particular job.  Properly drawn up T & C’s should be progressive as well as comprehensive, and if you omit a single phrase, you may negate the whole document.

When producing your quotation, ensure that everything is written down, including clients instructions and stated wishes. For instance, if it is important to the client that the paving is non-slip, ensure that the product used is indeed, non-slip. Be careful not to over promise; for example, a rabbit proof fence that proves less than 100% rabbit proof due to the ability of the animal to dig under or climb over the fence should be described as ‘rabbit deterrent fencing’ and a note of explanation to that effect included in the quote.

Try to imagine that you are a client, intent on finding any defect or difference between your quotation and the actual works carried out. Have you really made sure that you have done exactly what you promised?

Looking from the customers viewpoint

Don’t forget too, that any variation – any difference between the quote and job may be picked up on. Any changes in materials, even if they are ‘upgrades’ to more expensive products than those described in the tender, must be recorded and agreed in writing as the job progresses.

Any ‘extras’ that have been requested, and variations in quantity including increases or reductions must be agreed in writing, including amounts and costs. I fully appreciate that it is not easy to micro-manage projects when you are on a tight time schedule, but it is so important to keep control if you want to avoid problems at the end of the job.

Two main suggestions – the subject of contract and finance is huge, and involves many scenarios, but if you include two important contractual phrases, these will help to secure your company from post project late payments.

The first is the security of the contract. Having made sure that your wording, especially regarding quantities, qualities and method statement of how the job will be carried out, to confirm your stage payments (even if there are only one or two) and the timing of such payments, instead of writing requesting the first or mobilisation payment, issue instead a Pro Forma Invoice.

This is the same as a normal invoice, except that it is headed Pro Forma Invoice, is does not include  an invoice number, a date and Tax Point, nor does it include VAT. It is simply a request for payment, and once paid in full (money in your bank, not an un-cleared cheque), a standard VAT invoice is issued in the normal way. If you include Value Added Tax to a Prof Forma invoice, you will have to pay it, even if the client subsequently withdraws from the project.

This Pro Forma is the start of the contract, and sets the seal for future financial dealings. Its’ production proves that you are a professional company, meaning you are more likely to be treated as such during the project.

The second is extremely important. Your contract Terms & Conditions should include a phrase, clearly stating the stage at which the contract ends.

As no garden landscape or maintenance project can ever be 100% ‘complete’, as there will always be one bulb that has not shown, turf that has not knitted fully, or a newly seeded lawn that has not germinated for example.

This phrase is ‘The final account must be paid in full within X days of Substantial Practical Completion’. Note the order of the words. Substantial Practical Completion means exactly that. That is the cut off point of the contract irrespective of any warranties or remedial works.

Warranties and remedial/snagging works only begin on the day of completion, a fact that prompts some clients to try to extend that date, whilst withholding payment to ensure that extension. It all becomes a delaying game, with the contractor losing out at every turn!

By ensuring that your ‘paperwork’ is substantial and comprehensive, and with a firm line on payment terms and dates, you allow little ‘wriggle room’ for the customer to delay monies.