Practical Completion and Getting Paid in a Timely Manner
Not getting paid for your work is one of the most common enquiries I receive. Probably eight out of ten enquiries involve complaints about money and how to get customers to pay in full and on time.
I have written in previous articles about Professional Non-Payers and the challenges of extracting payment from those who do not wish to settle their accounts. There seems to be an ever-increasing number of cases where even straightforward projects are subject to payment issues.
It may be significant that most of the complaints involve small firms. I can only imagine that customers are more wary of larger companies, who are more likely to have robust procedures in place and be less prone to intimidation.
I believe the problems are wide and varied, but the solutions are simple if correctly implemented.
The Importance of Terms and Conditions
First of all, it is crucial to ensure that your Standard Terms and Conditions are in place, and that they are fully comprehensive. They should cover every aspect of the contract, including identifying the person responsible for payment—not just Mr and Mrs (or whatever), but their actual names, with a statement to that effect.
The Terms should be standard but also bespoke to the particular site. Do not pick and choose elements of your terms, leaving some out because they don’t seem to apply to this specific job. Properly drawn-up Terms and Conditions should be both progressive and comprehensive. Omitting even a single phrase could negate the whole document.
Quotations and Variations
When preparing your quotation, ensure that everything is written down, including the client’s instructions and stated wishes. For instance, if it is important to the client that the paving is non-slip, ensure that the product used is indeed non-slip. Be careful not to overpromise—if a rabbit-proof fence is less than 100% effective due to the animal’s ability to dig under or climb over it, describe it as ‘rabbit deterrent fencing’ and include an explanation in the quote.
Try to imagine yourself as the client, intent on finding any defect or difference between your quotation and the actual work carried out. Have you really made sure you’ve done exactly what you promised?
Looking from the Customer’s Viewpoint
Don’t forget, too, that any variation—any difference between the quote and the work—may be picked up. Any changes in materials, even if they are ‘upgrades’ to more expensive products than those described in the tender, must be recorded and agreed in writing as the job progresses.
Any ‘extras’ requested and variations in quantity—whether increases or reductions—must be agreed in writing, including amounts and costs. I fully appreciate that it’s not easy to micro-manage projects when you’re on a tight schedule, but it’s vital to keep control if you want to avoid problems at the end of the job.
Two Key Suggestions
The subject of contract and finance is vast and involves many scenarios, but if you include two important contractual phrases, they will help secure your company from post-project late payments.
The first is the security of the contract. Once you’ve made sure your wording is correct, especially regarding quantities, qualities, and the method statement of how the job will be carried out, you can confirm your stage payments (even if there are only one or two) and the timing of these payments. Rather than simply requesting the first or mobilisation payment, issue a Pro Forma Invoice instead.
A Pro Forma Invoice is like a regular invoice, but it is headed as such. It does not include an invoice number, date, or Tax Point, nor does it include VAT. It is simply a request for payment. Once paid in full (money in your bank, not an uncleared cheque), a standard VAT invoice is issued in the usual way. If you include VAT in a Pro Forma invoice, you will still need to pay it, even if the client withdraws from the project.
This Pro Forma is the start of the contract, setting the seal for future financial dealings. Its production proves that you are a professional company, meaning you are more likely to be treated as such during the project.
The second key phrase is extremely important. Your contract Terms and Conditions should include a clause clearly stating when the contract ends.
Since no garden landscaping or maintenance project can ever be 100% ‘complete’—there will always be a bulb that hasn’t sprouted, turf that hasn’t knitted fully, or a newly seeded lawn that hasn’t germinated—this phrase is essential: “The final account must be paid in full within X days of Substantial Practical Completion.” Note the order of the words. Substantial Practical Completion means exactly that. That is the cut-off point of the contract, irrespective of any warranties or remedial works.
Warranties and remedial/snagging work only begin from the day of completion. This sometimes prompts clients to try to extend the date of completion while withholding payment to ensure that extension. It becomes a delaying game, with the contractor losing out at every turn!
Keeping Control of Payment Terms
By ensuring your ‘paperwork’ is substantial and comprehensive, and by being firm on payment terms and dates, you leave little room for the customer to delay payments.
(If the project involves landscaping, construction, or machinery, it will fall under the Construction (Design Management) Regulations 2015, and finance matters should be included in the contractual file. This logic helps ensure timely payments.)
