Payments from clients are so rarely guaranteed. The risk of bad or late payment is a risk that the industry has mainly just had to accept and endure when it goes wrong as a cost of business. This doesn’t need to be the case. Contracting businesses should not have to expose themselves to huge payment risk in the course of their business. The norm needs to change.

A first and sensible step by any professional entity is to ensure all work is carried out to contract. This provides a strong working framework for any project and clarity to all parties. But the value of this contract is based on solvent entities. Where a client isn’t solvent, or is simply a bad payer who knows the pain involved in chasing payment via the courts, a contract is worth very little without proof of affordability, credit checks and the knowledge there is indeed the intent to pay and promptly.

Many contractors will demand deposits as a show of good faith, but this protection is only part and there are likely still periods during a project where once again you will be working in arrears. Deposits can also for good reason scare perfectly good clients off who have read one too many cowboy builder stories to not worry enough about a contractors cash flow demands to accept a deposit framework, no matter how genuine they may be.

These highlighted issues can all be resolved by the use of Pay-Trade.

Pay-Trade mitigates this two sided risk by providing 100% proof of affordability at outset by a deposit by the client into the FCA Regulated Project Wallet held against a contract (a Pay-Trade contract or a third party uploaded contract) and payments released from The Project Wallet to the contractor once a milestone, stage or project has been completed.

Retentions can be kept in The Project Wallet for an agreed amount of time post project completion to ensure snagging works and defects are carried out before being paid for.

Variations can be agreed online, adjustments made to increase or decrease The Project Wallet amount and projects quickly moved back into progress. This ensures all parties remain protected throughout.

This process ensures the contractor is fully protected and has proof of intent to pay and affordability, and ensures the client does not release money from The Project Wallet until professionally completed work is delivered.

The Pay-Trade system allows for architects acting as contract administrators to create and administer projects. This is in our view a more robust setup as it allows for independent valuations and checks of the work, in addition to any provided by building control.

Where deposits are demanded for cash flow purposes, we at Pay-Trade would urge caution to clients, but remind everyone that construction is an expensive product to deliver, and many smaller but very professional contractors and tradesmen simply don’t have the funds or credit accounts to work entirely in arrears. Where deposits are necessary, we would suggest a credit card payment is used to provide buyers with section 75 protection. This is likely to incur a payment charge but is likely worth it for the peace of mind it provides. All other payments are then made via The Pay-Trade Project Wallet.

Contractors

Protect your contracting business from bad or late payers

1 – Request the architect or contractor to submit the project via Pay-Trade for mutual protection and full transparency.

2 – All parties agree to the contract and any drawings and the client pays the full project amount, or initial agreed stage amount (for large projects where perhaps the total amount isn’t yet available) into the Project Wallet. Once the money clears with the Project Wallet, the project is marked as Work In Progress.

3 – The work is carried out to a completed milestone or valued stage and a payment release is requested either by the contractor or by the appointed architect by way of a valuation certificate. The buyer can then review the work carried out and release the amount requested by agreeing to and permitting the release of money from the Project Wallet, or where not happy, raise a dispute for resolution.

4 – Contractors can raise a dispute for clients who ignore requests to release from the Project Wallet where it has been professionally completed. We will then attempt contact with the client until releasing payment after 14 days to the contractor ensuring even clients who hide from payments can’t get away with late payment unless there is a genuine dispute of the work done.