Not Getting Paid in construction?

If you’re managing a small to medium-sized construction company, you’ve likely faced the frustrating situation where a client delays payment or refuses to pay altogether, claiming you haven’t met certain milestones. It’s a common headache in the industry, but it doesn’t have to be. What if there was a straightforward way to protect your cash flow without resorting to lengthy legal battles or damaging client relationships?

We’ve found a practical solution that works wonders: The Lawyer’s Trust Account Strategy. Here’s how it works, why it’s effective, and how you can implement it to ensure you get paid for the hard work you do.

The Problem: Unpaid Invoices and Payment Disputes

Let’s face it, chasing unpaid invoices is a drain on your time, energy, and resources. Legal battles are expensive and time-consuming, and they can sour relationships with clients. Most construction businesses just want to focus on delivering quality work and moving forward, not fighting over payments. That’s where a proactive approach comes in.

The Solution: A Lawyer’s Trust Account

Here’s the game-changer: secure upfront payments in a lawyer’s trust account. This simple yet powerful strategy ensures that funds are available and protected, so you’re not left high and dry. Here’s how it works:

1. Draft a Clear Contract
   Work with a lawyer to create a straightforward contract that outlines payment terms, project milestones, and dispute resolution processes. This document is your safety net, ensuring everyone is on the same page from the start.
2. Secure Funds in a Trust Account
   Ask your client to deposit a reasonable portion of the project cost into your lawyer’s trust account before work begins. This shows commitment from both sides and ensures the money is set aside for payment.
3. Release Payments as Milestones Are Met
   As you complete agreed-upon milestones, your lawyer releases the corresponding funds from the trust account. This keeps the payment process smooth, transparent, and hassle-free.
4. Handle Disputes Professionally
   If disagreements arise, the contract provides a clear framework for resolution. A portion of the funds can be held back until the issue is settled, ensuring fairness for both parties.

Why This Strategy Works

• Peace of Mind: You know the money is secured and will be released as you meet milestones.
• No Awkward Conversations: The contract does the talking, eliminating the need for uncomfortable payment discussions.
• Fairness for All: Disputes are handled professionally, with a portion of funds held back if needed.

How to Get Started

1. Consult a Lawyer: Have them draft a clear, concise contract tailored to your business needs.
2. Set Up a Trust Account: Work with your lawyer to establish a trust account for client deposits.
3. Communicate with Clients: Explain the process upfront, emphasizing how it benefits both parties by ensuring transparency and trust.
4. Stick to the Plan: Follow the contract terms, meet your milestones, and get paid on time.

A Quick Note

This strategy isn’t legal advice, it’s simply a proven method that has worked well for us at Keola. If you’d like to see a sample agreement or learn more about how we’ve implemented this, feel free to reach out at sanjesh@keola.co.nz.

Final Thoughts

Getting paid shouldn’t be a constant battle. With a little foresight and the right legal framework, you can protect your business, maintain healthy client relationships, and focus on what you do best—building great projects. Don’t let unpaid invoices hold you back. Take control of your cash flow today!