Getting That Elusive Final Payment

by WOHe

Remodeling contractors usually set up a payment
schedule with their clients which, more or less, matches the
progress of work on their jobs. Unless something serious goes
wrong, these payments flow in pretty much as scheduled until the
end of the project approaches. The normal pattern is to have a
payment scheduled when the job is substantially completed and a
punch list prepared, and the final payment when the items on the
punch list are cleared.

There are several factors that will impact your
ability to collect these late-in-the-job payments:’

  1. The relationship you have established with your
    client;’

  2. how the job has progressed up to the time a punch
    list is prepared, and’

  3. how expeditiously you move to complete items on the
    punch list.

Customer relations
The key to ensuring that you will receive payments when they come
due is the ongoing relationship that you have established with your
client. If this is a repeat client, he or she has the assurance
that you have followed through in the past and will, naturally, be
less inclined to use your payment as a motivation to get things
done. This, obviously, assumes that the client didn’t have to use
this approach in previous dealings with your company.

Some steps you can take to enhance this
relationship are obvious. Begin with a clear and concise contract
that lays out payment schedules and terms in detail. It’s important
to associate payments with a specific, objective event; avoid
subjective benchmarks. i.e., describe your “punch list” payment as
“upon installation of appliances and fixtures” (assuming that this
will coincide with a point of substantial completion). There will
obviously be little disagreement as to whether or not fixtures and
appliances are installed, while there can easily be significant
differences of opinion about what constitutes substantial
completion.

Another important practice is to meet regularly
with your clients during the course of the project. On larger
projects, particularly, the project manager should meet formally
with the clients on a weekly basis to review progress, problems,
concerns and required decisions.

This practice will give your clients a sense of
control and security with what is happening on’
their project.

The relationship you have with a client is usually
all about communication. When your client feels that he has good
lines of communication with your organization, he can unload his
concerns and not continue to “stew” about them. Most remodelers
make sure that clients are able to reach someone in an emergency at
any time. Along these same lines, make it a rule for your staff,
and yourself, that every client call must be returned on the day it
is received.

Job progress
Clients like to see their projects moving along at a steady pace.
While most people having remodeling work done will always want to
see the work done faster, most will be satisfied by a continuous,
steady work flow. What always causes problems with client morale is
the long periods of inactivity that occasionally occur. Here again,
communication with the client is the key to avoiding problems.

Most projects will require work to stop while some
off-site fabrication or other activity takes place. This will
result in a period of time when there is no work going on at the
client’s residence. These periods can be anticipated and pointed
out to the client early on in the project, or even before it
starts.’

It’s also wise to discuss with your client, at the
pre-construction meeting, the realities of coordinating
sub-contractors, work flow and changes, and the inevitability of
conflicts causing some slow days on their project. It’s a good idea
to anticipate this in your job schedule and incorporate some
“contingency” days that will allow the project to stay on schedule,
even if some of these down days occur.

These unanticipated breaks in the work flow are
always the most upsetting to the client.

When you see one of them coming up on a project,
contact the client in advance to warn him or her, and explain the
reason, how long you expect to be delayed and what, if anything,
you hope to do to make up for lost time. By looking back at
past’
experience, you will probably see that most clients are pretty
understanding if they feel that the contractor is leveling with
them. A good practice is to make sure that your client is contacted
at the start of each week and the work schedule for that week is
reviewed’
with him.

The client’s perception of how expeditiously his
project has progressed will almost always have a bearing on how
anxious he is to make payments as the job nears completion. If your
clients think that it was only their persistence that pushed your
firm to move the job along, they’re more likely to view these last
couple of payments as their only “leverage” to getting the loose
ends tied up. Not only is this hard on your cash flow, it can lead
to a sour ending to a project, instead of a happy customer and the
potential for good referrals.

Finishing up
All too often, we move clients back into their new kitchen or bath,
perform the punch list with them, heave a giant sigh of relief and
then immediately focus on other jobs. The next thing we know, four
weeks have passed and only two of the 12 items on the punch list
have been cleared. And, even worse, the client has added three new
items to the punch list.

I wish the above description was the exception in
our business, but I’ve discussed this problem with enough
remodelers to know that’s not the case The way to avoid this
scenario is to avoid the sigh of relief, and immediately after
performing the punch list, sit down and break it down into the
actions that are needed.’

If parts or materials are needed, get them ordered,
schedule your crews and subs back to take care of any items that
can be cleared, and get them there within a week. Get this punch
list out on a daily basis, and make sure some progress is being
made on every item. Then, review your progress on the list with
your client on a weekly basis.

If you focus on the punch list, you will find that
it can be cleared quickly and you will have two happy results: a
satisfied client and a final check to deposit.

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