It's simple, but its not easy. Why?

Friday, 10 October 2008

...Because you've got to DO IT...

It's not that tradesmen are dumb.  It's just that we trust people, just like everyone else.  Never ask the question, "How could this client, who I've been faithful to, fail to pay me?"

Last week, we cancelled a FREE information seminar for tradesmen about getting paid because of lack of interest.  Why is it that, even as money tightens up, we shy away from the facts that may SAVE US?

Even the biggest make this mistake in every industry.  Here is a salutary lesson, taken from Ben Silverman, a New York financial and PR editor and commentator -

"When Lehman Brothers filed bankruptcy protection last month Kekst & Co., a New York-based public relations firm that was handling crisis management. Kekst & Co., is owed approximately $400,000.

Kekst & Co. will have to wait a long time to get its money,and there's no guarantee that it will get all that it is owed. In fact, the firm could end up getting nothing because it's an unsecured creditor. Kekst & Co. will have to wait in line.

One problem that Kekst & Co. encountered, according to the newspaper, was that personnel changes in Lehman Brothers' communications department delayed payment. The firm was expecting payment just days before Lehman Brothers filed for bankruptcy, but the check never came. Even if the check had come, Kekst & Co. would have had to cash it and had it clear the bank before the bankruptcy filing.

As the economy continues to show signs of souring, more and more companies will seek bankruptcy protection in an effort to stave off creditors.

When times get tough like this it's time for businesses to get tough with their clients. During the dot-com bubble burst when I was doing some consulting I demanded either upfront payments or that clients put money into escrow to pay me. I had been burned by bankrupt clients in the past and my own finances were not secure enough to work without guarantee of payment.

I dropped two clients who refused to pay upfront or put money in escrow - and both went bankrupt. One client who paid me upfront went bankrupt, but I continued to work with the client after the bankruptcy filing because of the good faith the client showed me in paying me upfront. A judge later approved additional payments to me during the liquidation process and though the company closed up shop, I ended up doing some work for its founder when he launched a new enterprise.

There's a risk/reward quotient with any client. From a financial standpoint, you want to find out as much about the health of a company's business as you can and understand whether there's a risk of non-payment down the road. Likewise, do not let bills go unpaid. A personnel change is not an excuse not to pay a bill.

The sad fact is that bankruptcies have a cascading effect. A large company goes bankrupt and can't pay a small vendor. In turn, the small vendor can't pay its own vendors, or even its own employees. The dominoes just keep falling and someone ends up being the ultimate loser in the equation. Don't let that be you."

In the Queensland construction industry there is plenty of protection for your payment, but, YOU HAVE TO DO IT.

Make sure you always secure your entitlement to payment (or to reject a payment claim) by -
 
a) Using a contract (your trade association will have one); read it; understand what you have to do; DO IT.  This includes keeping a close handle on instructions and variations.
b) Tell your clients that you strictly apply the Act as company policy.  They will respect you.
c) Comply with the Qld Payment's Act (BCIPA) especially with the notices and the VERY STRICT timings.

Make sure you have your RECOVERY PROGRAM in place and ready to fire on short notice (we have recently seen people start the process of recovery after a long wait, only to find the client has declared bankruptcy), by -
a) Setting up you invoicing / payment claims to suit the Payment's Act.
b) Comply with the notices and timings.
c) Try to negotiate any differences within the timings of the Act.
d) If discussions fail, trigger the Act right away.

AIQSANA and your association can help you through training with your contracts,  setting yourself up for the Payment's Act, Using the Payment's Act.

Contact your association or:
The Australian Institute of Quantity Surveyors Authorised Nominating Authority
"Trusted Industry Professionals"
www.aiqsana.com.au - info@aiqsana.com.au - 07 5568 1503

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