A subject that has often come up in discussions and is worth re-visiting, especially in today’s market, is that old two-way street known as Loyalty Avenue.
It seems as though everyone has a different approach when it comes to payment for service or installation. Some require a percentage down before starting the work, with a signed contract, while others are perfectly content with payment made upon completion.
Is one policy better than the other? Or more importantly, when should one policy be applied over the other?
The two-way street refers to the trust that must be in place between you and the customer, in both directions, as it applies to installation, not service (which, by the way, should be cash on delivery – no exceptions).
There are numerous benefits to establishing a ‘payment upon completion’ policy for installations. It illustrates to the customer that you’re not a “hand-to-mouth” contractor who needs their money to purchase their equipment and materials. It indicates that perhaps your cash flow and stability is not what it could be.
That may not be fair or accurate, but it could very well be how the customer perceives your company. We all know that ‘perception,’ at least in the customer’s mind, is ‘reality.’
It also shows the customer that you trust them. After all, you’re making a significant investment in anticipation of receiving payment for that work.
The arrangements made for payment are an important part of the trust process. Many customers ask how much I want up front. They’re surprised when I tell them that I don’t need anything up front, but will generate an invoice for payment upon completion of the work.
Obviously, this pertains to residential and not commercial work. Commercial work does require some type of progress payments as well as a retention fee. That should be expected and spelled out in the agreement.
I wouldn’t assume that pre-payment is a requirement of doing business. I’m more than happy to pay immediately upon completion of a job or to make progress payments as long as milestones have been met as expected and as indicated. But I’m not comfortable with a ‘down-payment’ before work commences.
Think about it this way: How many of your suppliers or distributors require you to pre-pay before you pick up material or equipment? Granted, there’s usually an established relationship. Even once the business relationship has been established, there’s a reasonable expectation on their part that you will pay their invoice when you receive it.
The same level of expectation should exist with your relationship with customers. In the more than 30 years I’ve been a contractor, I’ve had a handful of customers who attempted to stiff me. Those individuals felt in their minds that they were justified because of some nagging problem.
I’m not advocating blind trust, but trust should be established. I tend to give customers the benefit of the doubt as long as they don’t take advantage of it.
Maybe I’ve been lucky not to have been burnt over the years. Maybe, because I’ve extended trust to my customer, and met their expectations, so there was absolutely no reason on their part to not pay me. The mutual trust that’s established early in the relationship should be reflected throughout the project so that upon completion, it’s natural to submit your bill and a happy customer pays it in full.
John Lloyd has been involved with HVAC for the past 30 years in a variety of positions and has presented programs and seminars for groups both in and out of this industry. John can be reached at [email protected]