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How to handle construction debt collection

On Behalf of | Mar 2, 2022 | Construction Disputes

As a construction company, your bottom line can be greatly affected when you can’t get paid on time. You work hard to complete jobs, but when the payments don’t come through, you could be left without the profits you expected.

There are some ways to prevent debts going unpaid. You have options like using an automated billing system, requesting deposits and asking clients to pay for items as they’re needed or to pay for labor as it occurs. You can also bill immediately for change orders and changes in scope from the original contract.

How do you handle debt collection when payments aren’t being made?

When you want to collect a debt, you can try a few different options. The first is to reach out to the person who owes you the debt and to try to work out a payment plan or date for payment. If that fails, then you may want to look into taking collection efforts.

If you decide to go through collections, you will need to be cautious about adding fees or interest to the debt. When you create a contract, the contract needs to say if there will be late fees, service fees or other penalties if someone does not pay on time. Failing to do this means that you may not be able to charge additional money for the debt that you’re owed.

As a construction company, you have the option of hiring a collection agency, pursuing wage garnishment or nonwage garnishment and other options when you’re trying to collect a debt. Depending on who owes you the debt, you may also be able to use a mechanic’s lien or other options.

Collecting a debt: Doing what’s right for you

Not all methods of collecting a debt are the same, so it may be tricky to determine which is right for your company. Before you begin trying to collect on a debt, it may be worthwhile to look closer into state law and to be sure that you’re going through the collections process correctly. If you do not, then you could end up facing legal trouble yourself.