Author Topic: Professional Non-Payers  (Read 1856 times)

Alan Sargent

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Professional Non-Payers
« on: January 27, 2016, 05:03:07 pm »
Professional Non-Payers

It truly seems that no matter how careful you are with ensuring that your documentation is in order – fully specified quotation, detailed method statements, Terms & Conditions that you have devised over the years, perhaps using your own variation of one of the standard types of form to ensure that you have been as careful as you can possibly be, you somehow end up with The Client From Hell!

As a long term Landscape Contractor (since 1968) who has worked for some of the wealthiest people in the land, turned over tens of millions of pounds during those years, and dealt with some of the canniest clients, I am still aware that I am only one job away from serious trouble should a customer decide to be vindictive or decide not to settle their account.

Over recent years, and being well past ‘normal’ retirement age, most of my work involves Consultancy, with no landscape commissions over ten thousand pounds being accepted, therefore my options for being bankrupted by any one individual contract are remote, I am as wary as ever, ensuring that all documentation is as bullet-proof as possible.

As a Consultant, I carry out a certain amount of ‘Court’ work as an Expert Witness and come across sad tales of woe involving non-paying customers. Even with 100% correct paperwork, it is still possible to give some clients the green light to become very difficult especially regarding the final payment.

I have tried to analyse these situations and have arrived at a number of conclusions.

A large percentage of our clients are ‘Business’ people, and some pride themselves in winning at any negotiation, treating contractors working on their houses as though they were either business rivals or company employees, there to be defeated or subjugated by the all-powerful Boss. This may sound somewhat neurotic, but sometimes it is difficult to imagine any other logical reason for their attitudes and behaviour once the job has started!

As they are used to dissecting contract documentation, actively seeking any loophole or item open to interpretation, having discovered these ‘defects’, they are able to exploit them should they wish to be awkward.

I have personal knowledge of one client who boasted that he ‘never paid the last 10% of any job!’ He actually prided himself in this matter, considering anything less as a ‘business failure’ on his part. His attitude was that the contractor marked up their prices by 20% and therefore felt it his right to ‘share’ that profit.

Another decided that he had overspent his budget by ten thousand pounds, and whilst he was very pleased with the work, and that he knew he would have to pay in the end if ‘chased around the Courts for a couple of years’, he would settle the final account (£16,000) on the spot if the contractor would agree to reduce the bill by the ‘overspend’. Either take £6,000 now or chase me for the £16,000! (And he was a Lawyer!)

How to prevent or try to avoid these difficulties? Ensure that your paperwork and contract documentation are substantially in order. If a case goes to Court, the Judge will not be too sympathetic towards a Plaintiff (the Client) if he/she thinks they are trying to be pedantic in most cases. (Obviously, this will depend on the precise nature of any complaint). Trying to outwit a genuine contractor by using loopholes and technicalities in their quotation is frowned upon if the firm have used common sense and exercised reasonable caution, Duty of Care and due diligence. (And an acceptable job of course!)

Secondly, concentrate on your Terms & Conditions of Payment. For any reasonable sized project (dependent on the size of your business, say from £1,000 upwards) present the client with a Pro Forma invoice for the mobilisation portion of the project.
Pro Forma invoices are not invoices in the normal sense, and should not have an invoice number, only the date of issue and perhaps a reference number. Only once this Pro Forma has been paid in full and the money safely in your bank should you issue a normal invoice complete with Date and Tax Point, number etc.

Pro Forma invoices should be presented in an agreed sum or percentage of the project, usually 25% of the contract total. This may however vary if the client has chosen an item (an expensive garden seat for example) that will require payment at the time of purchase and will be of little or no use to the contractor should they change their minds and not go ahead with the job. It such cases, the whole cost of the ‘special’ item should be paid in advance plus the mobilisation element i.e. the garden seat cost plus 25% mobilisation payment.

Depending on the size of the job, you may require either Stage Payments i.e. against the completion of an agreed amount of work, or Interim Payments i.e. at certain agreed times e.g. weekly/fortnightly/monthly. These must be settled in full within agreed time scales, usually five days from date of invoice. (If the client is not always available due to business commitments or holidays, these must be recognised and included in the programme of payments.)

Essentially, monies must be settled in a timely manner as the job progresses. Nobody would dream of walking into a car showroom and ordering a new model without accepting the payment structure of the garage business. Business is business, and terms are terms!

Within your Terms of Payment there should be a clause stating that all late payments are subject to 2.5% above Basic Bank Rate if not settled within your time scales. I have been known to issue invoices made out as a separate item showing the sum of 2.5% of the outstanding monies (2.5% of £3,000 is £75.00, and the raising of an invoice which become ever larger in the event of non-payment is quite salutary). Of course, you may opt for 5 or even 10% - if the figure is part of your Terms of Payment, the Court will honour that figure and order it to be paid if you are successful in your case.

Similarly, a written reference  to additional costs that will be levied should you be obliged to leave site/suspend the project until funds are in place and will be incurred at a rate to be decided. (Often shown as ‘all reasonable costs’ in leaving and returning to site, this will include off-hiring and re-hiring equipment/transport costs, re-scheduling the works etc.) This can be a costly exercise and must be paid for by the client.

If you decide to include all of these recommendations into your tender documentation you will certainly clip the wings of any awkward customer. Knowing that being unnecessarily difficult is going to start costing money will ensure that boastful and bullying behaviour is much reduced!

Never forget that we are contractors, and to work carefully within our own chosen framework and terms and conditions. Sometimes we have to protect ourselves, and such protective measures must be in place before acceptance of the work. We cannot add such clauses afterwards once things turn difficult!