Understand Construction Customers That Don't Pay - How to Deal With It

Are you tired of chasing down payments and dealing with the headache of late or non-payments in your construction business? You are not alone. It is a common issue that many business owners face, and it can significantly impact your cash flow, not to mention your stress levels.

In this blog, we will explore some of the most common reasons why customers in the construction industry refuse to pay. More importantly, it is how you can get paid on time with the help of a reliable bookkeeping service firm like CCA. Don't let late payments cost you time, money, and valuable resources. Keep reading to learn how you can avoid these issues and keep your business thriving.

Understand Customers That Don’t Pay

The best way to deal with customers that don't pay is to make sure they won’t do it in the first place. To do that, you need to know why clients refuse to pay contractors on time.

1. Billing Surprise:

No one likes surprises, especially when it comes to paying bills. If your customers get invoices that are not what they expected or are not clear, it can cause confusion and slow down payment.

The solution? Establish transparent and professional communication with your clients. By documenting all communication in writing, such as via email, you can avoid misunderstandings and refer back to evidence if needed.

2. Incorrect Invoicing:

Numerous factors, such as inconsistent formatting and unclear line items and categories, can contribute to inaccurate invoicing. No matter what the reason is, it can make your customers confused and unhappy, which can delay payment or even make them refuse to pay.

To avoid this scenario, make sure your invoices are always up-to-date and easy to understand. This means keeping your clients up-to-date on any changes to the scope or amount and giving clear, concise descriptions of your fees. Doing so can improve communication with your clients and ensure timely payment for your services.

>> Learn more: 4 Best Invoicing Software for Contractors and Construction Companies

3. Change Order Disputes:

Changes are an inevitable part of the construction industry, and they can sometimes lead to disputes over completion or change orders.

To avoid such scenarios, it is crucial to get your client's approval for any changes in costs and timeliness, no matter how insignificant they may seem. Failure to do so can result in unpaid work, which can significantly strain your business's finances.

4. The Customers Just Won't Pay

Non-payment is every business owner's worst nightmare. Whether it's because of a lack of funds or slow-paying customers, it can seriously affect your cash flow. In such situations, you might have to consider taking a lien on your customer's property to ensure that you get paid.

However, it's always better to do your due diligence before starting work and ensure that your customer has good credit. Even financially stable clients can run into trouble later on, so it's better to be safe than sorry.

How Much Does A Non Paying Customer Cost You?

Chasing down payments and dealing with financial losses can be frustrating and time-consuming. But if you ignore the issue, the consequences of bad debt can be even more harmful to your business.

A non paying customer has a huge impact on your bottom line. Even a small bad debt can greatly affect your profit margin.

According to the CFMA data and Levelset’s explanation, the industry average for specialty contractors' profit margin is just 6.2%. Let's do the math: if you have a 6% profit margin, you would need to generate $417,000 in new revenue to make up for just $25,000 in bad debt. That's a lot of new business that you need to bring in just to cover the losses from one non-paying customer.

Ignoring the issue won't make it go away; in fact, it could cause even more financial harm in the long run. That's why it's crucial to understand the true cost of a non-paying customer and take action to prevent and address the issue.

With the help of a reliable bookkeeping service firm like CCA, you can stay on top of your finances and avoid the headaches and losses associated with non-payment.

How to Stop My Clients From Paying Late?

Now you know it is important to get paid on time. If you are concerned about what to do when a customer does not pay, then here are 3 simple things you can do to speed up the payment process and avoid non-paying customers:

1. Send friendly payment reminders to your customers, and ensure they remember the date the payment is due.

2. Make it easy for them to pay through many payment options like a credit card, ACH transfer, checks by phone, and payments like PayPal.

3. Be serious with customers who take too long to pay their invoices. It's important to put an end to this behavior to avoid future payment issues.

Remember, it's your business, and you deserve to get paid for your services.

Electronic Payments Are on The Rise This 2023

According to the CFMA, more and more companies are moving toward electronic payments every year. Electronic fund transfers, known as Automated Clearing House (ACH) payments, and card payments are expected to be the most popular choices. Large companies with annual revenues exceeding $500 million are leading the charge. Here are some benefits of electronic payments:

• Faster and more secure payments.

• Reduced processing costs.

• Improved cash flow management.

• Enhanced efficiency and productivity.

• Better control over financial data.

How CCA's Accounts Receivable Management Services Can Help

As a construction business owner, you know the hustle and bustle of the industry all too well. It can be a challenge to keep track of all the moving parts, especially when it comes to accounts receivable.

Fear not, because CCA's accounts receivable management services are here to simplify your life and unleash the true potential of your business!

Our expert bookkeepers are focused on the construction industry's ins and outs, so you can focus on your specialty. Here's how we can help:

• Document Accurately

You can count on us to accurately record and categorize all of your data, providing you with a reliable customer history and reference. No more messy paperwork or missed payments!

• Invoice Timely

We make sure your clients know when payments are due and the exact amounts to be paid, along with any related terms. No more confusion or misunderstandings!

• Follow up Consistently

If your clients don’t pay invoices on time, don't worry; we'll take care of it. Our friendly and professional follow-up process ensures that you get paid quickly and efficiently without damaging your customer relationships.

But wait, there's more! Our advanced AR automation processes eliminate flaws caused by manual work, streamlining your invoice processing and ensuring fast payments

>> Learn more: Get Paid Faster & Easier With CCA's Accounts Receivable Process Flow Chart

In Conclusion,

Late or non-payments from construction customers might hurt your firm. Knowing customers that don’t pay is essential to preventing this issue. You also know how to collect money from clients who won’t pay. Three simple actions can be taken, like sending friendly payment reminders, giving multiple payment choices, and addressing special cases with care.

CCA's AR services are the best way to streamline your accounts receivable process and cut down on late payments. With our advanced automation processes and commitment to accuracy and professionalism, we can handle the finances while you focus on growing your business. Don't let late payments stop you from moving forward. Take action today and get the peace of mind that comes with a reliable bookkeeping service firm like CCA.