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Lecture: Re: Being PAID!

Discussion in 'Hardscaping' started by DVS Hardscaper, Jan 28, 2008.

  1. DVS Hardscaper

    DVS Hardscaper LawnSite Fanatic
    Posts: 6,417

    Ok guys. I'm going to write about something that I take VERY SERIOUSLY.

    And that is: GETTING MY MONEY.

    It seems as if a few here have had / or are having problems getting paid.

    Let me start with telling you a little about myself. I am a self taught businessman. I started this headache at a very young age. And I learned as I went. You name it, I've been through it, from pretty to ugly. Over the years I have learned alot about law.

    There is one thing that I virtually have never had a problem with - and that is getting paid. And I like to think that it's because of my proactive stance.

    Over the years I have talked with MANY contractors. And many contractors will collect the down payment, maybe get a 2nd payment along the way, and then bill for the final payment.

    I don't do that. I want my money. Not because I'm greedy. Not because I'm broke! But because I don't want to give anyone the opportunity to screw me.

    Folks, there are professional con-artists out there. They live in tents and they live in million dollar mansions. Also, most of them are the nicest, most down to earth people you can ever meet. But! In most states you can check people's criminal backgrounds for free. It's public information. It can be done at the courthouse.
    Heres a story: I have a close buddy that became friends with someone I went to H.S with, whom we'll call Kenny. Well over the last few months some things with Kenny have not quite been adding up. Over the weekend I went to the local gas station that I frequent and there was a note on the counter that said "NO more checks from XYZ Towing". Kenny is the owner of XYZ Towing. I though to myself "thats strange, he owns a big house, runs 4 tow trucks, blah blah blah". Then I thought "ok, the slow economy must be killing his tow business."


    Because of past events, curiosity got the best of me. So through my sources I ran Kenny's name through the state court system. HOLY COW - 42 EFFIN files on him came up!!!

    Going back to 1995 he has been arrested numerous times for bad checks and fraud. He has judgements out the you know what on him! Apparently he did not pay the fence contractor that put up a $3500 fence at his house. He got a trailer that he didn't pay for. I could go on and on.

    You would never suspect him as being like this. Very nice guy. Very sincere. He would go the extra mile to help you.

    Now just say he had you put a patio in and you give hin 7 days to pay the final balance. GUESS WHAT?! YOU'RE NOT GETTING PAID! His history shows this!

    Here is what I do. Some can say it looks desperate. But I been doing this for at least 4 years now, and there is nothing that will get me to change my draw system. Those of you that are giving people 1 to 30 days to pay the balance need to seriously reconsider.

    1. I collect 33.33% down, as this is what the state of MD allows.
    2. I collect another 33.33% the day we start the job.
    3. I'll collect another payment say when the base installation is complete. Or when the base installation and step construction is complete.
    4. Depending on the job, I'll collect another payment when the seatwall(s) are/is done.

    If the progress payment is not received - work is stopped. I have had 2 or 3 clients where when it was time for a payment....they suddenly had to go out of town on business. I even had one lady say "I just gave you a check, I'm not giving you anymore". I responded "ok, then we'll pack up and leave". Which I then started writting in our contract somthing along the line of "if payment(s) are not made - work will be halted". And I have never had any problems since.

    5. Another payment when paver installation is complete.

    The payment schedule is clearly spelled out in the contract. So it's not like I am randomly knocking on their door with my hand held out!

    The above is an example. I tailor the draws to the dollar amount. But I try to do it fairly for both me and the client.

    It is my intent that on the day we finish, the client has a balance of no more that $1500 remaining. This keeps my losses to a minimum.

    I try to stay ahead of the finances. Meaning, if there is a problem and its decided that we can not finish the job, I bill the client for what we did and I cut them a check, reimbursing them the difference.

    I have been an expert witness in court against a bad contractor.

    I have heard story after story.

    I am NOT about to do work and leave them with a $5,000(+) balance only to end up getting screwed. Ok, so we go to court? Kenny went to court at least 15 times over the last 13 years. All judgements against him. And guess what?! All his cases are still open! That means he hasn't satisified the debt!

    Folks, run your businesses how you want.

    This is something that I take seriously. And I am VERY proactive with.

    Suggestion - this may sound crazy, but if you really wanna learn about contract law and how the court system works - being that it is winter and most of you have little to do - go to your locall court house and sit in on some civil cases for a day or 2. I have done this. It's an invaluable learning expereince.

    Here is a copy and paste from a recent proposal:

    PAYMENT SCHEDULE - Client to submit payment(s) as follows:
    -1st Payment: Deposit of $18,723.00 (upon acceptance of this proposal)
    -2nd Payment: $18,723.00 paid on the day the work begins
    -$5,000.00 paid upon completion of stone pillars stone wall work
    -$10,000.00 paid upon completion of flagstone stoop, landing, and walks
    -Balance paid in full upon the day of completion

    Work will not be scheduled until the signed proposal and the deposit are received. In the event client can not be present to submit payment(s) as detailed above, client must make arrangements to see that payments are made to contractor as specified, or work will be suspended until payment(s) are received. Final payment is to be made upon the day of final completion.


  2. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Posts: 4,909

    Thats the way it should be....But if you listen to people on here, they dont have collection issues....And most dont care when or if theyre ever getting paid, theyre just so excited to have the work.
  3. RockSet N' Grade

    RockSet N' Grade LawnSite Silver Member
    Posts: 2,454

    DVS...........your style and mine and system match exactly. During the last two weeks I have been talking with an excavator friend of mine who is now selling all his equipment to pay his bills. Why? People owe him over 100k and are not paying, so now he is effectively out of business. I guess he didn't get it that he was/is not in the banking business.....

    TJLANDS LawnSite Bronze Member
    Posts: 1,669

    What Happened... did you do work for Kenny? Just kiddin

    20 years I have had to put liens on properties 3X, all three times I got my money plus fees. I do 1/3 deposit, 1/3 on start and 1/3 on completion.

    My problem Is in the last year or so I have changed my Lawn customers to
    15 days instead of 30.(before service is stopped) Just seems in NJ anyway that people are just paying slower.
  5. Total Landscape Solutions

    Total Landscape Solutions LawnSite Member
    Posts: 190

    Great thread!

    Luckily my attorney (who is a good long term family friend) helped me set up my payment terms. They are very similar to this. Percentages are a little different but the idea is the same.
  6. RockSet N' Grade

    RockSet N' Grade LawnSite Silver Member
    Posts: 2,454

    The little thing that I keep in my mind is:" little bites, little bites, little bites." It sounds funny, but it is easier for a customer to swallow little bites throughout the job process instead of large lump sum payments. Psychologically it is easier to swallow than the large lump sum and leaves you as the contractor with alot less financial exposure.

    STRINGALATION LawnSite Senior Member
    Posts: 777

    this was great information. i had been going 60 deposit 40 when i finish. your is similiar but i like the idea of the draws. part of my confusion is with my deposit i can make all purchases. so during the project your still making materials purchases? having said that i geuess your work is bigger so it would not be logical to get everything from a logistics point of view plus that goes against the work stoppage thus reducing liability. i need some business classes
  8. forestfireguy

    forestfireguy LawnSite Senior Member
    from nj
    Posts: 601

    We do 50% deposit, 30 % on start of project and 20 percent on completion, changes orders under 3k payable upon signing order, anything over is same terms as regular contract. If we feel a client will be a tough payer we will customize terms to leave as little out there as possible. I like some of the points you make DVS, I am not certain how contract law here in Jersey differs from Maryland but I'd like to change over to something more along the lines of what you do. Back in the day when I had my own business I took a hit really hard, poor contract, no add/change orders, just a handshake and the stupidity of a 22 yr old and I got screwed to the tune of 10 grand. It hurt really bad and still does everytime I think about it. To add insult to injury the guy was an attorney, he came right out and told me, I paid you enough to cover most of your expenses and I will eat you up in court so I'm not paying another penny, so I pulled off the job about 90 percent complete, he finished it up himself in the spring of the following year. In NJ there is a law called the consumer fruad protection act, and basically it says if you do work, any work, even add ons without a contract you are breaking the law and could possibly have to pay 2x the amount of work done in damages, at least thats how I interpeted it at the time. I do not know how it has changed since if it has. Bottom line guys you'd all do well to listen to DVS and learn all you can about contract law in your home state, if you do business in other states you'd better learn about those too. If you do not have the time or the mindset to do this yourself hire an attorney to help you write your contracts and never ever take a handshake for anything more than "a hello", " goodbye "or " nice job", otherwise later on you'll be looking at a one finger wave as the clent who screwed you is going to take a nice cruise with the moeny he didn't pay you. I said one thing wrong in that last sentence, it's on you not the client if you let yourself be screwed.....take to heart everything said here it's good advice!!!!!!!!!!!!!!!!!!
  9. DVS Hardscaper

    DVS Hardscaper LawnSite Fanatic
    Posts: 6,417

    Like I said, I am conatantly hearing stories about how home owners have played games with paying the contractor.

    Have you ever done an estimate where the home owner is talking about how he had an addition built, but he was happy at all with the contractor that did the work. But you see the work and from everything you can tell, the work looks fantastic?

    These are the types that you really need to collect draws from.

    I have met with some sketchy people. Not many, it's not that dramatic. But once in a blue moon I do come across some. And through our conversation at the initial meeting, I may detect that they are wanting something for nothing. Yet, we hit it off great! So I'll say to myself "ok, he seems to really like my company, yet he seemed determined to get this patio for next to nothing......lets see what he does when he gets the proposal with 6 payment draws specified!!!! I never hear back from these types.

    My other pet peeve is "HOLDING CHECKS". We'll usually have 2 clients a year that will pay their draws.....but they'll ask that I hold the check, so they can "move money from one acct to another". My son's daycare provider has a clause in her contract that states "payment is due on each friday, and funds MUST BE AVAILABLE ON FRIDAY".

    I think I am going to copy her idea and word it into my payment schedule paragragh. It kills me that we just spent a month planning a job, then time passes from when we actually start.....and they have the funds, but the don't have the funds positioned in place for me! Drives me up the wall!
  10. ChampionLS

    ChampionLS LawnSite Bronze Member
    Posts: 1,066

    Back in 1998, I had our attorney add a disclaimer to our invoices and estimates, after several run-ins with Sharks. (believe me, they ARE out there)

    It reads:

    All bills are due upon presentation. After 30 days, interest will be charged at a rate of 2% (24% annually) per month on all unpaid, past due invoices. If placed with an attorney for collection, client will be responsible for all attorneys fees of not less than 30% of the outstanding balance. Services stated herein are to begin on (start date) and terminate on approximately (end date).

    I have NEVER had one problem from that day on. Most people that are contemplating screwing you over will not sign a contract with a disclaimer. They argue right from the point they read it.

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