Tired of payment disputes and delays? Learn how to speed up the payment process while keeping your clients happy at the same time.
By Claire Scott
Every contractor needs their clients to pay on time. Whether you’re independent or running a large-scale roofing operation, you can’t afford to spend your workday following up on payments: The construction industry is too competitive.
Still, many contractors deal with chronic payment delays. A 2015 report by PricewaterhouseCoopers found that it takes an average of 70 days for construction workers to get paid. As of last year, construction ranked last on access to working capital.
So how can you collect payments faster without damaging your client relationships? It’s simpler than you might think – and it all comes down to how you structure the payment process.
In construction, many payment issues actually start with the contracts. There are often several parties involved in a project, from suppliers to subcontractors and sub-subcontractors. Because contracts follow a tiered structure, any delays with top stakeholders will trickle down to other contractors. In short, the more people you need on a project, the more likely it is that you’ll run into payment disputes.
While you can’t prevent every contract problem, this process has a direct impact on your payments. Your contract provisions must be specific, actionable, and clearly stated, or the client will not be able (or willing) to pay their bill on time later.
Now, let’s say that all your clients understand the cost of their projects and that your team always does a first-class job at communicating the project scope. Even when that’s the case, your clients may still struggle to pay the total upfront. After all, buying a new roof or renovating a building is a massive investment.
Some client-side factors that can lead to payment delays:
With so much competition for construction and roofing work, you don’t have a minute to spare on payment collection. That’s why it’s so important to have a payment process that works for your needs, rather than making your life more difficult.
In the past, there was no way to get around the manual process of collecting and recording paper payments. Now, however, the online payment industry is thriving – and there are more effective and streamlined payment options for contractors than ever before.
More than anything, today’s customers want a variety of easy online payment options. One increasingly popular method is Buy Now, Pay Later, a flexible payment model that allows clients to pay invoices over time without the hassle of applying for conventional credit. More than 55% of American consumers have now used “Buy Now, Pay Later” options to pay bills, and among Americans aged 25 to 40, that number rises to 60%.
This can also help clients make a faster decision when you’re trying to close a deal. After all, which would you prefer to pay up front: $2,000 up front, or four interest-free payments of $500?
Every step in the payment process reduces the chance that your client will pay on time. If you’re still mailing most of your invoices, you can save time and money now by emailing all invoices directly to the clients, whether with an online payment link or an attached PDF.
When you’re ready to take it to the next level, you can invest in a more robust project management system that will automate the invoicing process for you. By setting automatic payment reminders and tracking everything within a centralized system, you can cut down on errors and delays.
It might seem like overkill, but it’s important to give your clients the choice to pay online with credit, debit, and ACH with every communication, especially once the work is done. This encourages clients to pay on time and reduces any friction in the payment process. If you already have a dedicated online payment portal, it’s easy to link it directly to a button in your emails or feature it on your website.
Claire Scott is the Senior Content Marketing Manager at QuickFee, the leading online payment and financing platform for professional, home, and commercial services providers.