Payment is Not a Waiting Game

Monday, December 1st, 2014
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One of the great frustrations of mine is watching contractors wait far longer than necessary for their payments, or else only seek assistance on payments after months of waiting.

From what we see, the most common length of time contractors wait for their money is six to eight months. That is far too long, and many wait longer than that! Last month I came across one who had waited 12 years, and finally decided enough was enough!

The key concept to get into one’s head is that “waiting does not get you paid.” Contractors wait in the belief that by not chasing their money, their client will be appreciative, and will pay them eventually. This is a myth.

This is all about leverage. If your client can use $50,000 of your money with minor or no consequences then many will do so. Unfortunately, many contractors are unwittingly allowing themselves to become credit providers for their clients by sitting back for months fooling themselves that this will lead to payment.

Your money comes when your client has to pay a price for withholding payment. That price may be proceedings under Security of Payment, suspension of work, court proceedings, formal complaints to outside parties and so on. These start to make life uncomfortable for your client and make the withholding of payment far less attractive.

Many contractors will agree with the observation that they are waiting too long and it is doing them no good, but they still do it. It seems to me that this is part of an extremely powerful cultural value system that exists in the construction industry that requires contractors to be “good blokes.”

Unfortunately, that system needs subcontractors to assume a subservient role, not complain, be ‘co-operative’ about not applying the contract’s payment terms, and generally show they are a team player by not speaking up about their own needs for cash flow.

It is only when there is literally no cash left that contractors shake themselves out of their trance and realise that if they don’t do something immediately there will be no business left. It is one of the reasons so much money is left unpaid in insolvencies. Commonly the unpaid subcontractors are out by four months’ pay or more. That is, they have worked for four months with no payment at all and done nothing about it!

Payment is not a waiting game, it is an action game. If you are not being paid properly you ought to take action, and sooner rather than later. You may not be seen as a good bloke, but at least you’ll be a solvent one!

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