It’s not that hard to cut out 80% of your bad payers. Anthony Igra talks about the systems needed to ensure you get paid.

I know a contractor who was asked to do so much additional work that the value of the variations exceeded the original contract price. When it came to payment time the client fl at-out refused to pay any of the variations. It was then that the contractor produced every single variation request, where the work was detailed, numbered and signed off by the client’s foreman.

The client was furious, and grudgingly paid the whole amount, clearly realising that the weight of evidence was on the contractor’s side – it would have been pointless to dispute it. Another contractor had his client claim that he never gave any instructions to carry out some part of the work.

The contractor produced emails showing a direction was given. I know another who was accused of providing damaged product. But this contractor was able to produce photos of the product when it was delivered, and the signed receipt from the site representative. It was in perfect condition, clearly proving that the damage occurred after delivery.

The matter went to adjudication and the contractor’s evidence was so conclusive that the client realised that payment was the only option. A cheque for the $60,000 came the next week. These are just a few of examples of how paperwork gets you paid.

Some people only associate paperwork with delays, red tape and wasted time. Chances are those same people are locked in payment disputes over what was promised, agreed or quoted, and are unable to prove their case. The fact is that solid paperwork is probably the most effective weapon in defending a payment claim.

Good paperwork means that there isn’t this great void where neither you nor your client can prove what was promised, agreed or quoted. But most contractors struggle to get themselves and their businesses organised around simple and solid processes to tighten up on payment documentation.

The most common question I get asked after a claim is, ‘How do I stop this from happening again?’ So I put together everything I had learned from a decade of payment disputes, and created ‘Payment Mastery’. It provides 3.5 hours of content to answer that very question: How can a contractor tighten up on payment practices and avoid 80% of payment problems.

Let’s look at what this is in more detail.

Paperwork is contemporaneous evidence

The important feature of paperwork created or completed around a dispute is that it becomes ‘contemporaneous’ evidence; coming from the word ‘contemporary’. Good contemporaneous evidence will carry signifi cant weight in proving what happened, what was promised, agreed, or quoted.

In adjudication, the adjudicator will place weight on this kind of evidence in making a decision if he/she is satisfied as to its quality and credibility. Far too many disputes come down to the contractor’s word against the client’s.

The easy way to tip the balance in your favour is by including simple record-keeping habits into your work. In the Documentation Video in ‘Payment Mastery’, we go into detail about how you can not only create this kind of evidence, but also how you create ‘corroborating evidence’; documentation that backs up other documents.

For example: a site diary note might back up an email sent that day on the same issue. ‘Payment Mastery’ also provides 12 complete document template downloads for you to use straight away in your business.

Variation management variations/site instructions (time required: 30-60 seconds)

If you are given a verbal direction to carry out additional work, make sure it ends up in written form. If the client refuses to document the direction, then the contractor should document it in his own ‘Site Instruction’ form and issue it to the client.

I recently prepared an adjudication application where there were nearly 60 directions for additional work. Even though the client’s foreman failed to complete a variation advice as required by the contract, the contractor documented each one himself on his own paperwork; the details of the work done, who requested it, and dates and times were all recorded.

The result was that he was awarded all these variations because the adjudicator was satisfi ed that these ‘Site Instructions’ were valid contemporaneous evidence that work was requested and done. The hot issue of variations actually has its own dedicated video in ‘Payment Mastery’. In that we go into Variation Registers, how to complete them and how to incorporate the register into your payment claims. More importantly though, it covers the three crucial aspects of variations that need to be recorded on any Variation Approval: Scope, Price and Authorisation.

Photos/reports (time required: 30-60 seconds)

Stop talking on your mobile. Take pictures with it instead. In disputes around defective work or damage, take a pile of photos right there and then. If possible, have the work inspected by an expert who can prepare a report shortly after.

Often disputes around defective work occur months before a payment dispute. Only then does the client raise the defect as a reason for non-payment. If the contractor can produce photos and reports about the work from the actual time, this is excellent evidence as to what was or was not defective.

I recently prepared an application where the respondent refused to pay by alleging that much of the fi tted equipment was damaged by the contractor. However, the contractor had taken so many photos at the time, together with a detailed report, that clearly showed that the damage was caused by another trade. This type of evidence was impossible to argue with and the contractor got paid.

Site diary (time required: 60 – 90 seconds)

A site diary is useful because it typically captures a whole raft of information. Besides details of work done or directed, it also records weather, any delay details, conversations, staff  onsite/off site and more. This is a single record of each day that can take as much information as you want to include.

If you can make completing a site diary page a daily habit then you will be able to produce evidence regarding the dispute. Further, if you can show that this has been a daily habit for a long time, the weight given to your site diary as evidence will drastically increase.

Emails/faxes (time required: up to 20 minutes)

Any project will leave behind it a paper-trail of faxes, letters and emails. Keep all of these in a fi le in chronological order. They can show what happened and when. Furthermore, if a dispute comes up onsite make sure you confi rm the details in a fax to your client that day. Remember, verbal recollections of events aren’t worth the paper they’re written on.

Minutes of meetings (time required: up to 30 minutes)

Site meetings occur regularly on most projects, especially meetings that are supposed to resolve disputes. Most times the client will not provide any record of the meeting, what was promised or agreed. So this is the contractor’s chance to step into that void.

There is nothing stopping you from writing up your own record/minutes of the meeting and sending them to the client. Again you are creating a record of events and undertakings that can be useful evidence in the future.

Reconciliations rule

This is the most common weakness in contracting payment practices: very few of you prepare a proper reconciliation of what you are owed each month. That is nuts. Amazing as it may seem, many contractors don’t actually know what they are owed.

Every month your claims must show the breakdown of full work value, variation value, other amendments and the paid-to-date. Again, too many contractors are concerned with the ‘certified-to-date’ instead. You can’t pay your bills with ‘certified payments’!

A good reconciliation will show you your paid amount so you know exactly what remains ‘unpaid’. Payment Mastery has a complete video taking you through the reconciliation process; making it easy to follow. It also provides a completed reconciliation spreadsheet template to use each month. That way every outstanding dollar can be identified.

The power of paperwork

The power of good paperwork lies in its credibility and the weight that a court or adjudicator will place on it. Good paperwork very often beats hearsay, statutory declarations, someone’s recollections and will often catch out ‘invented’ evidence. Good paperwork is very hard to argue with and provides adjudicators with sound material upon which to make their decisions about what actually happened in the dispute. Good paperwork helps you prove and support your case for payment.

So what does all this mean for me?

It means you should start to get very excited about keeping great paperwork. Take a look at the estimated time you need to invest. Most of the time it would not reach 10 minutes a day. Now is 10 minutes a day worth it to protect your ability to recover payment and settle payment disputes?

Of course it is. Never again will you rely on your word against the client’s. There will be overwhelming evidence on your side. Make paperwork a daily habit right now, and rejoice while you’re doing it. Don’t see it as red tape; see it as money in the bank because that’s exactly what it is.

Anthony Igra is the General Manager of Contractors Debt Recovery.