This Podcast Is Episode Number 0316, And It Will Be About Contractor Tactics On How To Avoid Payment Problems Construction companies need short-term liquid working capital such as cash, lines of credits, loans, owner financing, credit cards, supplier accounts, and other forms of money to conduct daily operations. Small construction companies with annual sales volume less than $10,000,000 and other requirements enjoy some benefits that are not always available to larger firms. Likewise, larger firms can leverage economies of scale. The larger your construction business grows, the more likely you could end up operating as a bank without the hundreds of ways to generate revenues from fee income and interest calculation that banks use. The most popular method designed by investors and developers and shrewd business people who understand the concept of divide and conquer is for contractors to get little or no down payment for a construction project, do all the work, including change orders and then try to collect their money. What often happens is that contractors hate paperwork preferring to keep everything in their head. Then when it comes the time to collect their money, they find themselves having to re-sell the job and talk their customer into parting with their money. It's been said: "The value of services rapidly diminish after the services have been performed," which is why highly profitable companies like McDonald's gets your money before they deliver your meal. Compare the success and profitability of a McDonald's franchise to most restaurants. The least popular method is getting work orders and contracts signed, and deposit checks before starting the project, because most of us were conditioned from childhood through adulthood and beyond not to ask for money. Some construction company owners are gung-ho about doing the work and yet are embarrassed about asking for money.  Here are the 10 most popular excuses for not asking for money: 1. The customer just signed the contract, and I haven't done any work yet 2. As soon as I need money I will ask for it  (see Cash Flow Diagram) 3. I don't want to look bad in front of my customer by appearing needy 4. I don't want to appear financially weak in front of my staff 5. My wife is good at managing what little money I bring in, so I don't need any just yet 6. I have personal and business credit cards to finance the work 7. I have many charge accounts at suppliers everywhere 8. My sub-contractors don't bill me until the end of the month 9. I have a little cash in savings I can use for a while 10. I have a line of credit on my house (wives hate and FEAR this one) Solution: Offer payment options Financing - Get set up at a bank and/or credit union that will offer to loan your construction client money for small projects under $25,000. They sign paperwork with the lender; you do the work and get paid. Accepting Credit And Debit Cards - It's like having an "Electronic Armored Car" on standby 24 hours a day, seven days a week ready to take your money to your bank automatically. If your QuickBooks is set up correctly, an invoice can be emailed to your client, and when they open it, there is an option for them to pay by credit card immediately. When is a good time for you to ask for payment? When the contract is signed - Ask for a deposit and record it in QuickBooks and on the Pay Application. We recommend one week of work as a fair deposit. To calculate it, take the contract amount and divide it by the estimated number of weeks to complete. For example: Contract $50,000 / 5 weeks = $10,000. Use this money for working capital and stop financing somebody else's dream. Progress Payments - Every week, perhaps on Monday, you could review the work that was completed the week before, issue a simple invoice or better yet give your customer a full payment application and get paid. Payment Application Summary Page Payment...