The pros will tell you to be good pay; pay your bills on time, take discounts, make sure that everyone who works for you knows they’ll get paid and things will be good. Well, I agree with most, no, all of that but there is a downside to being what is called “Good Pay.”
Here are some scenarios, little plays that my company has starred in over the years; see if you recognize any of them, bet you do.
- 1. A good small excavating contractor shows up and wants to get paid early because someone else owes him and won’t pay; he has payroll to meet.
- Charlie the electrician doesn’t have time to figure out the final bill, an allowance, but he thinks it’s around $850 so you use that and it turns out to be $1,600 but after you settled with the client.
- You get a call from the supplier of a new service subcontractor. He says he’s owed money from one of your jobs for material. Ned Newsub has been paid but didn’t pay for the material; turns out the supplier gave him credit because he showed a signed work order for one of our jobs and the supplier knows our pay record so he gave Ned the material. Well, he meant to call but he got busy; is there a problem because he doesn’t want to have to lien the job?
I wish these were made up but only the names are fictional. All of these little “nightmares” are because we are known as “good pay.” As they say, no good deed goes unpunished.
In the course of a normal year in remodeling we are — marketing, presenting, designing, estimating, closing the sale and creating our work of dreams for clients. Many of us use allowances for some items and I agree that is usually a plus for clients. When allowances are used, it is important to reconcile them so that extras can be billed. Letting allowances unnecessarily accumulate at the end of a job is suicidal; however, a few are sometimes unavoidable.
We get busy and we know crunch time is coming when it’s time to close out the Jones’ job, to get their final bill ready for closing. You call the suppliers to remind them to send in their final invoices to reconcile the allowances; they drag and they promise and tempers get short. What’s wrong here? Why is it so hard for us, the Good Pay People, to get these closing invoices sometimes? I guarantee you old Slow Pay Sam has gotten his bills because the suppliers don’t want to be last in line when Sam gets his money from his client. Those same suppliers don’t worry about us because we always pay our bills so what’s the big rush?
We all deal with suppliers and vendors who offer discounts for timely or even early pay. Lumber dealers can process an invoice the same day (credits take longer however) to get it included at the end of the month. What about the idea to initiate a policy of discounting invoices for late submittal; if the bill’s here on time, it gets paid on time; if it’s 10 days late, deduct 2 percent, 30 days late, less 15 percent and so on. You would hear some screams then. It is a good idea but all I did was threaten and that helped for awhile but it really can be a problem and at a time when we don’t need extras ones. Purchase orders of course eliminate the problem but they don’t work very well on allowance items. Those of you who use unit costs from suppliers have less of a problem, but I expect you are not free of the “late invoice syndrome.”
There is no substitute for having a mutually beneficial relationship with trades and suppliers, one that includes a responsible and responsive billing and paying process. And, it is certainly good business to pay your bills promptly; but when it leads to being taken for granted, sometimes being good can be bad, while you’re here . . .