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How to Get That Final Payment

Sound far-fetched? According to the latest Remodeling Market Index (RMI), 56% of professional remodelers say they sometimes have a problem collecting the final payment after completing the job. While not surefire, there are several ways you can avoid this problem.

Communication Is Key

Tony Thompson, president of Remodeling Services Unlimited, Columbia, SC, believes communication can help avoid not receiving payment. “Communication is the key. Put payment terms in writing on the contract and change orders,” says Thompson. “Most of our problems in the past came with not staying on top of changes and communicating them with the customer. When they got the final bill they were surprised because we failed to keep them informed along the way of changes and costs. I can't stress how important clear, constant communication is to a project.”

Rick Montelongo, president of Montelongo Homes & Remodeling, San Antonio, TX, says to avoid any misunderstandings by either party, his company meets with the client after completing a substantial part of the project to discuss a final completion list that both parties sign. “This states that both parties acknowledge that once this list is complete and the job is finished, the final payment will be paid,” says Montelongo. “By documenting and signing a completion list this gives the home owner the opportunity to express any final concerns.”

Create a Credit System

Kathe Ostrom, president, C.N. Ostrom & Son, Inc., in Excelsior, MN, says on top of communicating with her clients on a regular basis, her company also “works” with the client. “I always try to give the client a ‘credit’ for something,” says Ostrom. “It may be as little as $6.30 from an allowance. If there is a larger amount still owing, I will make up a credit, even up to $150 against something that I thought would cost more but we were able to do the job for less. It helps your client think that you are really on their side and looking out for their money.”

Closing Pomp and Circumstance

Don Strong, president of Brothers Strong, Inc. in Houston, says he makes a big deal about turning over the project to the client. “When I call to make the appointment I explain that I will be collecting the final payment and is there anything I need to bring?” says Strong. “I make a big deal about turning over the project, including all paper work. I make it clear that anything else will be a warranty item and they can relax in terms of future issues as we give a two-year warranty.”

Collect it Upfront

Donna Shirey of Shirey Contracting in Issiquah, WA, said her company had a problem collecting the final payment and decided to do something about it. “We now take a percentage of the total estimate as a deposit,” says Shirey.

Shirey says, depending on the size of the job, she will hold a 20% deposit as a part of the final payment. “Our goal is to have a very small final payment amount so the client does not have us over a barrel. There is nothing worse than being held hostage because a client owes us a substantial amount of money when the project is complete.”

Avoid the ‘Toxic’ Client

Finally, learn how to fine-tune your ability to detect and avoid the “toxic” client. Thompson says to watch out for the picky customer. “I usually see this in the very beginning and walk away. Sometimes choosing your customer is important and something you learn to identify. A lot of times it's the picky customer that will stiff you, so if you suspect a picky customer watch out.”

Thompson advises remodelers to make sure the client has achievable expectations. “Make it clear what will be performed and the payment terms,” says Thompson. “If they start off with bad paying habits, beware. This is another sign of a customer that may want to stiff you. Again, if you get in this situation you need to communicate what the payment terms are and what is expected from them.”

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