I was talking to a friend…
I was talking to a friend the other night who mentioned that his previous boss, a residential builder, had stopped a job because he hadn’t been paid a few of his last invoices on one job. He still managed to pay out his subbies and employees but had to write off close to $350,000 out of his own back pocket because of a client who asked for work to be done, agreed for the work to be done, had a contract for the work to be done, had the work done, then ……. couldn’t pay.
Many industries are affected by having to chase late payments and get stung by those who don’t pay at all. Some people say they ALWAYS get paid. Maybe they do or maybe they don’t but have just chosen to block it out of their minds. Maybe they think that getting paid, weeks or months after the due date, doesn’t count, after all, they still received the money. Do they even realise that their clients are effectively treating them as their bank? Or do they choose to ignore this? Do they turn a blind eye to the cost to their business of not having that money, money they worked hard for, that could otherwise be used to grow their business rather than financing their clients?
The building industry in particular seems to accept this as part and parcel of a working business. Why?? Why is it just accepted that a payment, quite often the final payment, will be withheld and possibly never paid? It’s just written off.
Back to the builder at the beginning of the story, he has worked and run his business including having suppliers and contractors work on this project for close to 3 months before he accepted that he wouldn’t get paid. The client just simply didn’t have the money… there was no use in spending more time and more money to chase it.
If he had known he wasn’t going to get paid from the outset what do you think he might have done? Probably worked for a client who did have the money! Or maybe, seeing as he was going to spend 3 months of his life doing something with no pay he might have chosen to go on a super long holiday!? Maybe travel around South America or see some of Asia? Or spend the time at home being there for the day-to-day goings on of his kids?
Or to put it another way what could that $350k have meant to his life and his business if he had it in his pocket now. I know what I would do with it….. pay off my mortgage!! He just wrote off the full value of my mortgage and just accepted it as a part of doing business. It’s mind boggling!
I reckon next time he might do things differently. Like make sure the client has the money to pay before he starts the work! I’m pretty sure once he’s using CheckVault, and getting his payments secured in advance, he’ll find plenty of ways to spend the money he would have other wise written off if he’d kept doing things the way he’s always done them.
What about you? What would you do with $350,000 cash??