Construction Law
Common Invoice Mistakes That All Contractors Should Avoid
Nothing will derail a construction project quite like a payment dispute. While you can’t stave off extenuating circumstances, such as owner bankruptcy, you can do your part to ensure that payment is received by properly managing your invoices. In this article, a Greensboro construction lawyer with Cotney Attorneys & Consultants discusses common invoice mistakes that all contractors and subcontractors should avoid. By implementing the below recommendations, you may be able to avoid having a payment dispute escalate to a full-blown legal battle.
Ignoring Contract Terms
Can you say with certainty that you understand the terms of your contract? The contract should stipulate when invoices are to be sent, on what forms they are to be written, and what information they are to contain. Even if you have a system you’ve been using for years, you must not ignore the contract terms. It may require that you use another party’s billing system.
Remember, your contracts will not only determine payment methods but also your obligations to a project. To have a professional review your contract, consult an attorney from our Greensboro construction law firm.
Refusing to Adapt to Another Billing System
Even when you understand the contract terms, you may be unfamiliar with the required billing process. This applies mostly to the numerous subcontractors that come and go on a project site. Every project may require that you become familiar with an entirely new billing system. Failing to adapt to these systems could lead to a missed invoice and payment dispute. For all you know, you may encounter a system you prefer. Many contractors now require invoices to be uploaded electronically, which makes organizing and accessing invoices a breeze.
Leaving Subcontractors Out of the Loop
As a contractor, you must be cognizant that the subcontractors you work with in the field aren’t the same people handling invoices. Likely, they have their own accounting department to handle that. Don’t forget: if your subcontractors were not involved in contract negotiations, they’re likely unaware of the contract terms. Reach out directly to their accounting department with regards to invoices. Better yet, have a dedicated project accountant who can ensure consistency across the board. If a subcontractor contacts you about a missed payment, consult a Greensboro contractor attorney.
Failing to Stick to a Payment Schedule
Cash flow issues are an unfortunate reality in this industry. It’s not uncommon for a company to invest substantial resources into a project in the hopes of a large payout in the end. Subcontractors that allow billing to fall by the wayside in favor of tackling the task at hand fail to understand that they will be unable to continue work without regular payments. A prompt invoice will more likely result in prompt payment. Additionally, the sooner you send an invoice, the sooner you’ll know if you’re facing late payment and a possible dispute.
Sending Deceptive Invoices
Your invoices should be clear, concise, and transparent. They should only contain information that pertains to applicable dates, names, addresses, services provided, costs, and terms of payment. As mentioned, billing systems will depend on contract stipulations, but your invoices should always contain these items. An owner is far more likely to pay for services and materials if they can see exactly where costs originated. Above all else, our Greensboro construction law lawyers advise against inflating costs as it will likely result in a dispute.
Accepting Unapproved Change Orders
Another reality of the construction industry, change orders can result in drastic alterations to a project’s scope of work. The last thing you want to do is spend time and money that hasn’t been approved by the owner. Just as an owner is sure to be surprised by an invoice, you will be surprised by their refusal to pay. As our attorneys can attest to, you never want to put yourself in a position to forfeit your right to payment.
Not Consulting a Greensboro Contractor Attorney
A prompt, professional invoice is your best chance of securing regular payments, but there is no guarantee that an owner will abide by them. Whether deliberate or unintentional, missed payments are a common problem for cash-strapped contractors. That said, you do have options available to you in the event of nonpayment. In most instances, a demand letter with a legal letterhead is enough to persuade an owner to pay up. In others, a mechanic’s lien is the last remaining option. If an owner is refusing to pay for the services or materials you provided, consult a Greensboro construction attorney from Cotney Attorneys & Consultants.
If you would like to speak with an attorney from our Greensboro construction law firm, please contact us today.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.