Magazine article Business Credit

Payment: Good to the Last Drop! (Communique)

Magazine article Business Credit

Payment: Good to the Last Drop! (Communique)

Article excerpt

Preserving lien and bond rights may help protect your company from late payment and nonpayment, so make sure not to waive these rights for unpaid work. Before you start work, ask for as much information as possible that will help you assert these rights should you need to do so. Pursuing a lien or bond claim may put pressure on the customer to pay, but sometimes it's not enough pressure or your contract isn't properly written to entitle you to timely and full payment for work properly performed. This can be especially true when it comes to final payment terms in your contract.

The contract you sign might give the customer enormous leverage to keep your money as long as possible. After your work as a subcontractor is complete, the customer may be entitled to hold retainage and other sums until "final completion," "final acceptance" of the project, or some other milestone possibly or possibly not related to your work. In the meantime, your need to meet payroll, capital expenses, etc., is the same as always. A long wait for the 'last check" can cause serious cash flow problems.

When your company is feeling financially "squeezed" is exactly the time when having effective rights to payment becomes most important. Under pressure to pay employees and vendors, many subcontractors have forfeited some claims to payment in order to receive retainage or final payment. These subcontractors learned the hard way that accepting a check for "final payment" usually legally erases your ability to pursue payment for outstanding claims such as unapproved change orders. …

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