Say Goodbye To Late Construction Payments With These 9 Tips
Being a contractor means going through myriad tedious tasks on a daily basis. One of these tasks is ensuring timely payment of invoices. According to Funding Gates, the construction industry is one of the top industries prone to delayed payments.
So, how can you get your clients to pay on time?
Source: MoonInvoice
Well, several factors can contribute to late payments. Maybe you’re sending invoices to the wrong person. Or perhaps, your invoice is filled with errors or inaccuracies.
In this post, we’ll talk about nine actionable steps you can take to reduce late construction payments immediately.
9 Ways To Reduce Late Construction Payments
1. Send Preliminary Notices
The lack of visibility is a major hurdle for contractors and construction businesses. Large-scale projects often have multiple teams working on different sites and locations. The contractors are rarely in direct contact with lenders and property owners.
Thus, the payment process often becomes diluted, and your invoice will have to go through several steps and tiers before reaching the right person.
You can overcome this hurdle by sending a preliminary notice, also known as the ‘notice to the owner.’ A preliminary notice is sent to all the top parties involved in the project. This way, you can be upfront about your payment requirements.
While this method may sound a tad aggressive, a LevelSet article showed that sending preliminary notices can reduce delayed payments by 83%.
2. Pair Your Invoice with the Right Type of Lien Waiver
A lien waiver is a document that you, the contractor, would send to the party availing your services. It acts as a substitute for the payment you’d receive after the construction is completed. Having a lien waiver means you have the rightful possession of the property you’re constructing. Once you receive the payment, the lien waiver rights are revoked.
Now, most people in the construction business know what a lien waiver is. But do you know the different types of lien waivers that exist and which one to send?
Here are the four main types of lien waivers you should be sending with your invoices.
- Partial Conditional Lien Waiver
- Partial Unconditional Lien Waiver
- Final Conditional Lien Waiver
- Final Unconditional Lien Waiver
3. Invoice Early
Timely invoices result in timely payments. It’s essential to send the final invoice as soon as possible and then follow-up once the deadline approaches and once after the due invoice date surpasses. On large-scale construction projects with several sub-contractors involved, sending early invoices and reminders is crucial.
Manually sending invoices and reminders can be a tedious task. It’s always better to use Online Invoicing Software for Contractors to make your invoicing process faster, easier, and more accurate.
A typical construction process comprises myriad documents. The last thing you’d want is to not get paid on time because you weren’t able to produce a crucial document.
Source: LevelSet
Using a document management system allows you to save all your documents online in a digital form. When needed, you can simply download the document and generate its hard copy. In many cases, invoice software for a contractor comes with built-in document management capabilities.
5. Create Estimates
Your customers should have a vague idea of the total cost of the project. It’s always a good idea to give them a ballpark figure when signing the contract. This way, your customers will know what to expect. Or better, you can convert the estimate into a preliminary invoice. An invoicing system allows you to create accurate estimates within seconds.
6. Keep the Payment Process Simple
You really don’t want your customer to delay the payment because he wants to pay with a card, but you only accept cash. As a business owner, especially a contractor, it’s essential to accept a wide range of payments to make the entire process quick and simple.
Make sure you accept payments online. Give your customers several payment options, such as cash, card, online banking, and mobile wallets.
If you don’t know how to accept all these different types of payments, don’t worry. Online Invoicing Software for Contractors like MoonInvoice allows you to accept payments from various kinds of methods and sources.
7. Prioritize High-Quality Documentation
If your invoice looks like the other documents, it’ll blend in and go unnoticed. A construction project includes a monstrous amount of paperwork, so you should ensure each document stands out and is easy to identify.
You can utilize a contractor invoice template to create custom invoices. The same goes for other docs, like contract agreements, construction schedules, etc.
8. Send Recurring Invoices for On-Going Projects
For lengthy construction projects that span for months and years, sending one final invoice, in the end, is never a good idea. Split up your construction amount into smaller, recurring invoices, and ask your customers to pay you monthly or quarterly, depending on the length of the project.
9. Use Online Invoicing Software For Contractors
Online invoicing software is a tool that helps you generate bills, invoices, and estimates for your clients on the go. Often, businesses find themselves spending time and resources on manual billing.
According to Ascend Software, small-midsize businesses spend around 25 days processing a single invoice when using manual methods. Online invoicing can alleviate this time to 2–5 days, thereby helping you save time, money, and resources.
Source: SoftwareSuggest
Here are some reasons to use invoice software for a contractor:
- Faster, quicker, and simpler invoicing
- Cloud-based storage — remote access
- Billing and invoicing automation
- Enhanced security
- Optimized financial operations
- Support for various languages, currencies, and payment methods
- Reduced costs
- Seamless data analysis and auditing
- Access to contractor invoice template
Invoicing software solutions like MoonInvoice can play a vital role in improving your billing, invoicing, and accounting operations.
Wrapping Up
The challenges of being a contractor go beyond late payments. With so many documents and information to manage, staying productive and efficient can be challenging. Therefore, it’s essential to invest in online invoicing software for contractors that allows you to streamline your invoicing, accounting, and document management processes.
If you’re looking for robust invoice software for a contractor, check out Moon Invoice.
Source : https://www.mooninvoice.com/blog/goodbye-to-late-construction-payments/
