Business Articles - Legal and Insurance

Communicating the Contract for Payment

It's a basic understanding that contracts in our industry are designed to protect the legal interests of the parties involved. All too often, due to the self-inflicted ignorance of the home service professional, the contract becomes a club in the hands of the Owner in order to beat the unsuspecting pro into submission.

As a home service professional you should become astute with your contract terms, clauses and, most importantly, your rights under your local and state statutes. I want to address how you can better position yourself for payment in accordance to the contract.

Most often overlooked is the value of the contract as a communication tool. You can use the contract to reaffirm its contents and insure agreement from the Owner regarding its application during the contract work phase. In short, I like to call it positioning. By getting additional agreements to the exact clauses in the contract, you have a better chance of having a good working relationship with that Owner and getting paid on time.

Here is a basic list of steps you'll want to consider for your contract management payment system.

- Review contract for compliance with local and state statutes. Never give up your legal rights.
- Send a confirmation letter to Owner stating your clear interpretation of the payment clause as stated in the contract, including partial payment requests, time of invoicing, and payment time to you from the Owner. Make the Owner agrees to your interpretation.
- Send to the Owner your desired procedure for agreement to all completed quantities for payment. State who from your organization will have the authority and, if known, who you perceive as the authority for agreement on the Owner's part. Again, request agreement in this procedure.
- Send to the Owner a copy of the intended invoice (per contract if specified or your choice of invoice format if not). List all information, quantities, pricing, etc. In my construction company we call this the 'Zero Dollar Balance Invoice' which we always used to get an agreement from the Owner on the invoice format before we signed the contract. This was instrumental in eliminating any delays later.
- Next inform all personnel in your company as to the progress payment procedures including time, authority and intended partial payment invoice amounts. Let your field people know exactly how much they must get done and by when.

If you implement this type of a system for your contracts, you'll find that everyone will be in agreement and everyone will have a clearer understanding of what is got to take place in order to make it a successful project for everyone!

Henry Goudreau, C.S.L.
HG & Associates, Inc
"We turn contractors who dream of a successful business, into business managers who make a business successful!"

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