Residential construction is notorious for slow payments. If you’re spent any amount of time in this industry, whether you work for a GC or you’re running your own operation, you’ve likely felt this pain and spent your fair share of time chasing payments.
Contractors historically collect payment in the form of paper checks, which requires several steps for a homeowner to write and mail said check, or requires you, who is already onto another job, to backtrack and collect payment in person from your customer.
All of this equates to additional time for payment to reach your pocket. In fact, it’s been reported that it can take contractors, on average, over 2 months to receive payments following an invoice.
That’s a lot of time spent without payment for a job that’s already completed and time you’re taking away from other jobs to either follow up on that payment or travel to collect that payment. Fortunately, there’s a better way. Through standardized operational practices and tools designed to help you keep your projects organized and invoicing easier, you can change the way – and speed – in which you’re paid for your work.
Establish Payment Best Practices In Your Contracting Business
The path to getting paid faster starts with setting clear expectations with your clients. To do this, it’s essential to have clear payment terms and practices — including payment due dates, accepted payment methods and late fees. These terms should be laid out clearly in your contract for easy reference. This clarity also helps prevent any misunderstandings or disputes regarding payments.
As the project progresses, provide regular reminders as you approach payment milestones to help ensure your clients prioritize and make timely payments. If a client fails to make a payment on time, follow up with a polite reminder. Often a quick email or call prompts them to complete the payment as they likely have simply overlooked it.
To that point, to encourage timely payments, consider implementing late payment penalties if you don’t already have them within your payment terms. These late fees will be included in your contract and should be clearly communicated to your clients at the outset of the job.
If this isn’t something you want to include in your terms, consider this: As the contractor you are shouldering the burden of non-payment and eating the cost for every day a payment doesn’t land in your pocket. By not motivating clients to pay in a timely manner with a late penalty fee, you are essentially giving your clients an interest-free loan on your money.
Expedite Payments with Contractor-Designed Tech Platforms
Contractors are known for traditionally handling stacks of paper invoices, receipts and payment records — holding significant risk in lost or misplaced documents, not to mention the manual, time-consuming nature of filing said documents.
Imagine an easier way. With invoicing and financial management platforms aplenty, all your projects financial details around payment milestones, invoices and payment records can be created and stored electronically. Additionally, technology enables you to easily generate and send electronic invoices and reminders to clients, simplifying the billing process, saving time and minimizing the chances of errors or discrepancies. All of which adds up to getting you paid sooner.
It’s time for the trades to trade up to tech.
Luckily, in today’s world there’s an app and platform to manage every piece of your project. MyCraft is a project management tool focused on the financial management of your projects. By creating transparency and clarity around payments and milestones, we help you build trust with clients and get paid faster for the work you’ve completed.
Create Customer Convenience with Flexible Payment Options
As mentioned earlier, checks are the leading form of payment in construction, which relies on a largely manual nature on both sides and ultimately extends the time it takes for your paycheck to hit your account. Often time and money you don’t have. When you rely mainly on one form of payment, and an antiquated one, at that, you are seriously risking your cash flow.
Further, accepting various payment methods sets you apart from competitors who may still rely on traditional payment methods. Tools like MyCraft allow contractors to accept all electronic payment forms within the platform, including credit cards and ACH bank transfers.
When you offer multiple payment options, you make it easier for clients to pay by meeting them where they are, which not only improves their overall customer experience, but also increases the likelihood that you’ll receive payments on time.
Better Payment Practices to Win More Jobs
As you implement improved payment standards and tools into your business, you will spend less time managing a mess of paper invoices and chasing (likely already late) payments – reducing your risk for disputes and cash flow challenges. The time saved through better payment practices pays dividends, allowing you more time to focus on the quality of your project and building stronger relationships to continue growing your business.