Is pay when paid legal, and what do you do about it?
Whether it holds depends on your state and on the language you signed.
An attorney answers the legal question, because the rules vary by state and by contract. The company controls what it signs and how it plans for it. Before the markups go out, leadership reads the contract for business impact, such as the payment terms, and legal reads it for what happens if the dispute goes to court. Pay when paid also governs the company's own subs. A sub's retention is released when it's released to be paid, and the company can't pay people for money it doesn't have, which is why the company collects diligently.
Three moves, in order
Step 06: Project management
Billing dates, change orders, and notices, written as standards that work without anyone following up on them.
Learn this part of the job
SPM The Construction CFO publishes this course. It's a separate company from this one, and the course is on its own school site.
Other problems step 06 solves
Other things that go wrong
What owners ask
Why is pay when paid legal?
Whether it holds depends on your state and on the language you signed. An attorney answers the legal question, because the rules vary by state and by contract. The company controls what it signs and how it plans for it. Before the markups go out, leadership reads the contract for business impact, such as the payment terms, and legal reads it for what happens if the dispute goes to court. Pay when paid also governs the company's own subs. A sub's retention is released when it's released to be paid, and the company can't pay people for money it doesn't have, which is why the company collects diligently.
Which part of the system fixes this?
The step is number 06, project management. Billing dates, change orders, and notices, written as standards that work without anyone following up on them. It's drawn from chapter 6 of CONTROL: C.F.O.S. Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M to $5M averages 7% after taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack is, and your own job costing tells you where you are, which is the number that pays payroll.
Where do I start?
Have leadership read the payment terms of every contract before the markups go out.
Can I fix this without touching anything else?
You can try, and it doesn't hold. Step 06 depends on step 04, estimating system. Install it ahead of that and it produces numbers the field won't trust, which is worse than the problem you started with.
Wrote CONTROL, the 8 step system behind these figures. More about the author.