Never Mind Cowboy Builders – Beware the Cowboy Clients!
We’ve all heard of cowboy builders – after all, they’ve brought the industry into disrepute which has had a somewhat negative effect, mostly on smaller to medium sized construction companies. However, today’s news turns the tables as we learn that UK building companies are under threat from what they dub as “cowboy clients”! According to the latest research buy the Federation of Master Builders (FMB), a massive three quarters of construction SMEs claim that cowboy clients are hampering their business.
Cowboy client is a term that’s being used to describe clients who delay or withhold payment without good reason, or those clients who make totally unreasonable demands on SMEs. Nearly a quarter of all building companies have had to wait for more than four months for payment from a client or a large contractor. This can result in serious cash flow issues that often lead to bankruptcy for the building company in question. Less than a third of building firms said they are always paid within the standard 30 days. To get a handle on how seriously this can affect business, take a look at the following figures:
- 30% have had to delay paying suppliers due to late payment by clients.
- 20% claim that late payments results in them not having sufficient confidence to expand their business.
- 16% have had to borrow additional funds from a bank or other lender in order to carry on in business whilst waiting for payment from clients.
- 8% narrowly avoided business closure due to late payments.
- 5% had to withhold paying staff salaries.
- 4% had to make staff redundant.
These figures clearly demonstrate the adverse effects on construction companies who struggle to obtain due payments from clients. It is putting people out of business, making people redundant, increasing overheads for construction company owners and, in many cases, extending the issue to businesses owned by suppliers. This is clearly unacceptable and it often seems like the worst offenders when it comes to late payment are the larger companies. These are the companies which are less likely to be affected themselves by late payment as their sheer size provides them with a much larger safety net that allows them to cope with delay in payments.
When it comes to unreasonable demands, these may include demands for the builder to undertake work not included in the original quote (scope creep) for no extra payment and the heinous practice of “discovering” make-believe faults in the work leading the client to delay payment or withhold part of the payment.
The only way a building company can protect themselves against cowboy clients is to use a comprehensive written contract that details the work to be completed and an agreed payment schedule. For those who are still struggling to collect payments owed for completed projects, advice from a debt collection agency that offers a no-win/no-fee service would be the first step along the path to recovering the debt from the client.