Late payments hurt small and medium-sized construction firms; it’s a fact. The latest research by the Federation of Master Builders shines a light on the negative effects late payments are having on construction SMEs, particularly to grow and prosper. Thirty percent of builders have had to delay payment to suppliers, eight percent almost went out of business and five percent had to withhold wages and salaries from staff. Don't let your business suffer, here are FMB Insurance top tips for ensuring your construction company gets paid on time, every time.
- Put your payment terms in writing
Yes, you really do need a contract before you get started. Today you can’t only rely on a discussion; to ease confusion and disputes, issuing your clients with a contract will clearly outline not only the services you plan to provide, but clearly define payment terms. Not sure on how to write a contact, well if you’re a member of the FMB you automatically have access to a range of contracts.
- Send invoices out promptly
It goes without saying, invoices should always be sent out on time. The sooner a client receives an invoice the sooner they will make payment. If invoices are your downfall why not use online management tools – there are so many out there!
- Offer easy payment methods
Whilst some clients want to pay by check, others may prefer to pay by credit card. Offering a variety of payment options means less fuss for clients. Plus including electronic methods could see your business receive payments eight days faster than using more traditional methods according to FreshBooks.
- Provide early payment incentives
Giving your clients a reasons to pay early is an effective tool if done right. For example, you could offer a 2% discount for early payments.
- Keep a Good Rapport With Clients
Building strong relationships in every area of life is an essential component to success, particularly in construction. Good communication is the cornerstone of building trust, so keep communication lines open. Handle situations with professionalism and care as some clients may have a genuine reason for not paying on time. You could even renegotiate payment terms as a temporary solution.
Late payments have unfortunately become a common practice in the construction industry. But, by following these best practices, you can protect your firm from situations where you are left waiting for the check.