GC Withholding Payment? Construction Project Management Software Helps Get Trades Contractors Paid

Everyone deserves to get paid promptly for work they do. Unfortunately getting trades contractors paid doesn’t always happen, and the consequences can be critical. 

“Nonpayment by contractors is a common problem for subcontractors who are depending on prompt payment for work completed,” explains attorney Mary Sherris. As a result of nonpayment, many trades contractors have trouble staying in business. 

For construction trade contractors, “cash flow is your life blood,” writes the Sweeney Law team. “You simply cannot afford to be in business if you aren’t paid, and often, not getting paid on a single job can send you into a financial spiral.” 

Nonpayment obviously isn’t fair to trade contracting specialists who provide a service and should be paid in full in a timely manner. And while there are legal steps you can take to resolve the problem, they are often expensive. When money is already tight, legal action often isn’t a viable option. 

Fortunately, there are some things you can do to attempt to collect on outstanding invoices to your general contractor that may help you avoid the costs of legal action. Before you take any of these steps, however, be sure you have every aspect of the project properly documented so you can prove you have done the job as stipulated in the contract. 

Proper Documentation Is Critical to Collecting Outstanding Payments

The first step to getting paid is actually an internal task — ensuring every aspect of a job is meticulously documented. “In the construction industry, you cannot afford to be careless in your record keeping,” according to the team at TradePrintingUK.

If you don’t yet know why the general contractor is late making payments, you need to be prepared for everything. Your best defense to any reason the GC may throw at you for nonpayment is project documentation. That’s why you need construction project management software, like eSUB.

The technology helps your teams easily and efficiently input project information in real time so all project data is accurate and accessible. Most importantly, the software has mobile capabilities so all project stakeholders can input information from any location at any point throughout the day. It then stores that data in a central location so anyone can access it at any time. 

While the technology houses a wide range of data, when it comes to getting paid, the most critical information is going to come from field notes and daily reports. Both are important to proving what did or did not happen on the job.

Field Notes and Daily Reports Prove Project Progress

Field notes and daily reports are real-time records from a job site. They show the details of a project from beginning to end. “The construction daily report is a way to verify whether the project is making progress in terms of the timeline, material use, budget, etc., as documented in the contract,” writes Julie Clements, vice president of operations at Managed Outsource Solutions.

Both are used for not only tracking project progress, but also documenting issues or delays and providing evidence for potential disputes or claims. Field notes and daily reports should include data related to progress updates, milestones, issues or delays, scope changes, and every other detail of a project. “Even the smallest details are critical,” notes construction attorney Trent Cotney.

Although every project needs dailies, they are not always completed by workers. Submitting reports is a time-consuming process that most will procrastinate as long as possible, especially if the submission process requires the use of pen and paper or spreadsheets. These delays increase the chances of errors as people may not remember all of the details accurately at the end of the day or the next day.

Construction management software solves those problems by streamlining the process so all stakeholders can easily and quickly submit that information. 

Software simplifies the process of submitting field notes and daily reports on the go and centralizes that data. This cuts down on the amount of time it takes to submit the information which means teams will complete them more regularly and their data will be more accurate. 

When field notes or daily reports are recorded through the software, they are permanently connected to that specific project and anyone can reference them when needed. This is helpful for trade contractors who need to demonstrate work done when pushing general contractors for payment. If there are questions or disputes, the information in field notes and daily reports can be used to answer the questions and settle the dispute. 

Photo Documentation: The Critical Element of Project Notes

What makes construction project management software particularly useful is the ability to take and upload photographs within field notes and daily reports in real time. Field teams no longer have to take the time to physically develop pictures attached to their notes or transfer the images from a camera to a computer. The technology enables them to immediately attach photos as they are taken.

This is an important capability because photographic evidence is key to proving what was done on a project. “Photographs are critical because it is like a daily report on steroids,” writes Ariela Wagner, president of SunRay Construction Solutions. “It gives the viewer of your photo great context about what was happening during the course of the project.”

Once you are satisfied that you have all the project documentation you need to make your case for payment, it’s time to reach out to the GC to see if you can learn why they haven’t yet paid you.

Talk to the Contractor to Find Out Why Payment Is Late

“Finding out why a client misses an invoice due date is the best first step,” writes Handle CEO Patrick Hogan. “You’d be best served by communicating with the client directly instead of ruminating on the possible reasons and jumping to conclusions.”

That’s because there are some very common reasons why a general contractor may be late on payment. 

For starters, they may not have been paid yet by the client. Therefore, they have no money with which to pay you. Such a circumstance may have also led to them having to file for bankruptcy. Though somewhat unusual, it does happen. It’s also possible the problem is as simple as human error — maybe they overlooked your invoices or never even got them. 

The more typical reasons general contractors withhold payment include contract disputes and dissatisfaction with the quality of the work.

“When you sign an agreement with a contractor, there are usually expectations outlined in the contract,” writes the team at Northwest Lien. “If a sub doesn’t meet those expectations, contractors may withhold your payment and try to force you to finish the project satisfactorily. It’s sometimes not even a subcontractor’s fault, but they can still find themselves at the receiving end of a pointed finger.”

This is where your field notes and daily reports with pictures come into play. They help you defend yourself against claims of incomplete or bad work. If you prove the work was completed satisfactorily, with images to back up your reports, then the GC no longer has reason to withhold payment. 

Once you have established the reasons for nonpayment, you can make a decision about what to do next.

Take Steps to Push for Payment

The last thing you want to do is file a lawsuit against the general contractor. Going down this path is expensive and time consuming, so it should be the last resort. First try resolving the issue through mediation or arbitration. If that doesn’t work, file a mechanic’s lien. If neither of these result in payment, then it’s time to go to court. 

Dispute Resolution Through Mediation or Arbitration

One way for trade contractors to collect payment is “by initiating the dispute resolution process,” writes attorney James Birr. This process includes mediation and arbitration.

“Mediation is an informal settlement conference, wherein the parties agree to use a third-party mediator to guide and assist the parties to come to an agreement,” explains Birr. “On the other hand, arbitration is a private, legal determination of a dispute, by an impartial third-party. Arbitrations are similar to litigation, wherein the decision of the arbitrator is final and binding on the parties.”

If neither of these work, you can choose to move ahead with litigation to solve any disputes that are holding up payment by the general contractor. Before doing that, however, you may want to consider filing a mechanic’s lien. 

File a Mechanic’s Lien

A mechanic’s lien (also known as a construction lien) gives the lienholder (the trade contractor) an interest in the real property to ensure a debt is paid. Ultimately, it can be used as a means to foreclose on the property so you can collect the money you are owed when the property sells. 

When you file a lien, you are essentially putting pressure on the property owner and general contractor to pay, notes the ConstructionDisputes.com team. “Filing a mechanics lien elevates your collection effort and demonstrates to all parties that you are serious.”

It’s important to note that the conditions for filing mechanic’s liens differ by state, so be sure to do your research ahead of time for your particular state. 

eSUB’s Documentation Capabilities Helped Thermal Construction Get Paid

No matter which route you take to get paid, your project documentation is the foundation for your efforts, as Thermal Construction learned when it was working through a difficult project. 

“We were doing a project and it was a disaster,” said Thermal Construction co-owner Sheila Myers. “So, we kept notes, we kept track of any issues that the people running it were causing us. We kept a record of delays that they were creating.”

Later, when everything reached a breaking point, the company was prepared to defend its work. 

“When we had issues with getting paid, we had to go through litigation,” said Myers. “But because of the field notes and the different things we had reports for, we had the documentation to prove what happened on the job. It proved that there were issues and we got paid and didn’t have to file a lawsuit.”

And that’s not the only time eSUB helped the company get paid. from having up-to-date project documentation. 

“We’ve had issues getting paid,” Myers said. “But because all the information that we have in eSUB, if we’re ever in that situation, that information is all right at our fingertips. We have the pictures, we have all the notes that we put in there, and it all helps us with whatever we may have to do to get paid.”

If you aren’t getting paid for your work on a construction project, schedule a demo of eSUB Cloud today to learn more about how software can help resolve this problem.

Images used under license from Shutterstock.com.