Final payment not recieved yet. Whats the next step?

Roofing Business Talk
1

We finished installing a new roof on a apartment building 2 weeks ago. We installed a new certainteed roof with 8 new velux FS model skylights and 15 new pipe boot flashings.

The day we finished the final clean up I sent a invoice to the customer. The customer took first 8 days to make contact and say that they were under the assumption the skylights would finished inside. I explained to them that skylights need to either be trimmed with pine or drywalled to after they are installed. They wanted me to come by and look at it. I did, I looked measured it up and told them the options. They have made no contact sense. I asked about payment and they said they didn’t have a chance to look at the work we did yet (8 days after now). They want to check the work that we did, before paying I guess?

My contract states " Payment of 50% of this sum to be paid in full on the start of the job and the remaining balance is to be paid in one additional payment of 50%. At the time of full completion. Full completion is when all roofing is installed, debris cleaned up, driveway raked with magnet, dumpster removed".

My Contract says the following:

" Contract does not include interior finish work. Skylights should be direct fit if drywall is not a direct fit additional work order must be signed for interior finish work of skylights to begin"

In past experiences I usually just suck it up and do what something if it’s small and going to get me paid. But trimming out 8 skylights total inside to the existing drywall isn’t just a hour or two. I calculated and sent them a proposal for interior trim work for $1,200 to trim out the 8 skylights with pine they are all about 30"x55" lights.

I feel that they are withholding the money thinking that it will force me to do the interior work. I really do not want to do the trim work to get my money but they owe just shy of $7,000. I presume since I have called them 3 times since I looked at the interior of the building they are choosing to not make contact. It has been 14 days since the final clean up. I refuse to open any more contracts with them as well at this point until the previous one is paid in full.

My question is how do I proceed with the matter? I would rather have the final payment as the loss of cash flow currently isn’t helping. Do I threaten them with court? Small claims here has a limit of $5,000. If I hire an attorney for civil court I would end up paying a bunch in fees to him/her. A lien probably will take years to get any compensation from…

Any help with this issue would be greatly appreciated.

Thanks,

2

I wouldn’t get too excited until at least a month has gone by but for now you could send them a letter stating late fees will be applied if payment is not received by a certain date.

My contract has a clause at the bottom where they sign saying "Payment is DUE upon completion of the work and LATE after 10 days. If payment in full is not received within 10 days of completion a 5% late charge will apply. By signing this contract, the customer agrees to pay any and all fees necessary to collect payment, including but not limited to attorney fees, court cost, Lien filing fees and ALL LATE CHARGES.

3

Those bastids.

they should have the decency to communicate in a professional manner.

i would 331 them. find the owner or big boss and talk to him respectfully. let him know you want to move onto your other projects and not have to wonder about this scheduling of the job you just finished.

i had a dude say he was gonna pay me for awhile so i googled, facebooked, 311ed, out of them. i got all the info i could find and i set out to find a boss.

i told the boss i needed to move onto new projects and they need to get back to me so i can proceed. he understood. and we got things done.
if tou need to show up and just wait. wait for a answer. tell the you dont do the inside trim.

not even sure you can do it not unless there is drywall? what do they want you to drywall the entire project?

but get some communication going even if you have to phone from your girlfriends mothers house. or pay phone. that way youll know if they are trying to avoid you. if they are trying to avoid you purposely then youll know you have a problem.

worst case scenario talk to a student lawyer. they usually free. make them pay your lawyering fees if things go bad.

i hate bastids like this. especially when your workers need to be paid.

4

Consult an attporney about your contract. I believe they may suggest you change full completion to say substantial completion. Then define substantial completion as “Contractor shall be considered to have substantially completed the work called herein when work is sufficiently complete in accordance with this Agreement so Owner can occupy or utilize the Premises for its intended purpose.”

I made my collection process automatic. And the most important cog in that wheel of automation is that someone who has no personal interest in the job be the one to send out the threatening letters. making it automatic makes it matter of fact and removes the emotion involved with collections.

On the 1st and 15th collection letters were sent out. Collection letters were generated automatically by quickbooks by simply running a couple of reports. Sales reps got copies of all collection letters and invoices.

At 15 days past due they got a friendly collection letter.

At 21 days past due we started to add finance charges, as per the contract. That ALWAYS gets their attention. You won’t always be paid the finance charges, but it usually speeds up the payment process.

At 30 days past due a formal collection letter.

At 60 days past due more finance charges, a harsh collection letter.

At 70 days past due, sales rep forfeits all commissions, and the file gets referred to the lawyer. The lawyer informs the customer they have 10 days to make payment or we file a lien.

At 80 days lawyer calls asks what he should do and lien process begins.

If at any point in time the customer says to me: “Sue me” or similar, we escalate immediately to day 70, after first giving the sales rep one last chance before their commissions are forfeit.

Having said that, I always governed my dispute resolution process as, “If it’s cheaper to fix, than to fight, fix it every time. Even if the customer is wrong.” I will add if I was going to do something freely to please the customer, I would ask them to sign a change order stating they will immediately make payment after XYZ has been completed and that there are no other issues or complaints at this time.

We have all had customers string us along. “Do this and I will pay you. Also now do that. Etc…” Making the collection process automatic had eliminated most of the collection issues I ever had.

By the way the customer is responsible for finance charges, all collection costs, legal fees, court costs etc…

You MUST make this automatic, remove all thought and emotion, or you’ll never do it. The system won’t work if you don’t work it.

One more thing. What does your contract say in regards to interior work? I always believed what is not being done is more important than what is being done. When ever replacing skylights, always add a line to the contract that states, “Patching sanding, painting, trim or any interior work is excluded.”

At this point, send it to your lawyer and let your lawyer deal with it. Focus your energies on the next job. $7k is alot of money but I would suspect not enough to put you out of business. Just let your lawyer deal with it and focus on your core business. When your lawyer finally gets you paid it’ll be like Christmas in August!

5

Lots of solid advice and wisdom in the post from Grumpy. If there were a “Roofing Business 101” book, that could almost be a complete chapter all on its own.

[quote=“Grumpy”]Consult an attporney about your contract. I believe they may suggest you change full completion to say substantial completion. Then define substantial completion as “Contractor shall be considered to have substantially completed the work called herein when work is sufficiently complete in accordance with this Agreement so Owner can occupy or utilize the Premises for its intended purpose.”

I made my collection process automatic. And the most important cog in that wheel of automation is that someone who has no personal interest in the job be the one to send out the threatening letters. making it automatic makes it matter of fact and removes the emotion involved with collections.

On the 1st and 15th collection letters were sent out. Collection letters were generated automatically by quickbooks by simply running a couple of reports. Sales reps got copies of all collection letters and invoices.

At 15 days past due they got a friendly collection letter.

At 21 days past due we started to add finance charges, as per the contract. That ALWAYS gets their attention. You won’t always be paid the finance charges, but it usually speeds up the payment process.

At 30 days past due a formal collection letter.

At 60 days past due more finance charges, a harsh collection letter.

At 70 days past due, sales rep forfeits all commissions, and the file gets referred to the lawyer. The lawyer informs the customer they have 10 days to make payment or we file a lien.

At 80 days lawyer calls asks what he should do and lien process begins.

If at any point in time the customer says to me: “Sue me” or similar, we escalate immediately to day 70, after first giving the sales rep one last chance before their commissions are forfeit.

Having said that, I always governed my dispute resolution process as, “If it’s cheaper to fix, than to fight, fix it every time. Even if the customer is wrong.” I will add if I was going to do something freely to please the customer, I would ask them to sign a change order stating they will immediately make payment after XYZ has been completed and that there are no other issues or complaints at this time.

We have all had customers string us along. “Do this and I will pay you. Also now do that. Etc…” Making the collection process automatic had eliminated most of the collection issues I ever had.

By the way the customer is responsible for finance charges, all collection costs, legal fees, court costs etc…

You MUST make this automatic, remove all thought and emotion, or you’ll never do it. The system won’t work if you don’t work it.

One more thing. What does your contract say in regards to interior work? I always believed what is not being done is more important than what is being done. When ever replacing skylights, always add a line to the contract that states, “Patching sanding, painting, trim or any interior work is excluded.”

At this point, send it to your lawyer and let your lawyer deal with it. Focus your energies on the next job. $7k is alot of money but I would suspect not enough to put you out of business. Just let your lawyer deal with it and focus on your core business. When your lawyer finally gets you paid it’ll be like Christmas in August![/quote]

6

I’ve always said we need something similar to how consumers can look up businesses on the BBB. We need to have a way to look up a potential customer to see if he paid the pool guy in full or did the lawn man file a complaint that he never got paid for 60+ days. I would definitely pay an annual membership fee for that.

In this business there seems to be a lot of final payments that hit that “risk/reward” threshold in regards to trying to collect your money. I’ve only gone to court for one that owed us $8,500. And that was two yrs ago…and I haven’t been paid yet…but I think I’ll get paid when she kicks the bucket. I try to look at it on the bright side. Hopefully one day when I reeaalllyyy need that $8,500 I will open the mailbox and there it will be!! :wink:

7

The problem with going to court is collecting attorney’s fees. In most states, $5,000 to $6,000 is where small claims court ends. If you’re owed $6,000 to $10,000 and go all the way to trial, it’s likely to cost you $4,000 to $6,000 in Attorney’s fees. Normally, the judge will award anywhere from 10% to 33% of the collection amount for legal fees/costs. Say you’re owed $7,500 and go all the way to trial. If the judge awards 33% for legal fees, you get $2,500. Your cost is likely over $4,000. So you lose $1,500 right there. You win but then you have to collect. Not necessarily a given. More legal fees.

It sucks, $6,000 to $10,000 is in that “no mans” land where pragmatically, going to court may be questionable. At minimum, you would like to try to avoid it if at all possible. With that said, I also don’t think you can sit back and be run over by a dead beat Customer. You need to send a message that you won’t stand idly by and be cheated out of money you’re owed. The Customer also has legal fees they have to pay. Assuming they’re not on the verge of bankruptcy, their mortgage company is way less than happy to see a lien applied to the property. If pushed, the mortgage company may pay the lien to clear the title and then apply the payoff to the mortgage payment.

We just had someone in Alabama who were refusing to pay their back end. A little over $7,000. They fabricated a bunch of crap reasons that were all shown to be groundless. We had our Attorney file the suit and after a few months, we had provided the other Attorney with sufficient documentation they recommended to their client that they settle. We got paid in full but ate almost $2,000 in Attorney fees. I hated settling but after discussions with our Attorney about taking this all the way to trial, realized pragmatically this was the best decision. At the end of the day, the determining factor was lost opportunity costs. I had to consider all the time that would be wasted by our people attending depositions, trial, etc…

8

Interesting you mention that. I had the same thought, and went so far as to register “myproblemcustomer.com”. I never took it any further than that.

9

[quote=“Sentry”]

Interesting you mention that. I had the same thought, and went so far as to register “myproblemcustomer.com”. I never took it any further than that.[/quote]

There was a site like this about 10-12 years ago deadbeatcustomer.com or something, and honestly have seen sites like this out there from time to time. Here is the thing, they won’t work unless we work them. There is the credit bureau already. Also there are public records. I saived my self from a nighmare more than once but checking the public records and seeing liens were filed in the past on a property. I don’t know what made me check, but there have been times for some reason I checked the county records and saw lien history.

Business is risky and there is nothing anyone can do to completely eliminate that risk. With greater risk should come greater reward. It sucks to say but the customers who do pay, pay for those who don’t because you can not personally absorb those losses. They simply get marked into the bottom line.

10

what are the steps for automating the collection process in quickbooks? we are currently doing everything manually.

11

I have just started using ProRinger.com wguch allows contractors to network and review homeowners. It’s basically a better and free but still very new Thumbtack.com