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It’s Wise Up Wednesday! So How Important Is Collecting Retention?

It’s 2014 and whilst things might be looking up, we need to stay  focused on doing the right things in our business, because the future isn’t certain, with no-one truly knowing what is round the corner.

These past few years have been anything but plain sailing for Specialist Contractors in the construction industry, and that’s why we have put together our Streetwise Wise Up Wednesday Guides to give you a quick burst of stuff that will help you in your business life.

Sometimes quirky, sometimes hard hitting, but always guaranteed to make you think and take no more than 2 minutes to read.

So How Important Is Collecting Retention?

The collection of retention money is not usually on most Specialist Contractors’  list of priorities. But just stop and think about that for a moment.

What is your actual nett profit as a percentage of sales?

If you are like most Specialist Contractors, your actual profit after overheads might be as low as 3% to 5% of sales. If contractors are hanging on to 2½% of sales, they are effectively hanging on to your profit.

In most Specialist Contracting businesses, attention is focused on the now, the current jobs and the cash flow from those jobs. This is, of course, extremely important and attention has to be given to those issues.

However, if you set clear priorities, you can focus your team on the collection of retention money without affecting the rest of your business.

You simply do not have enough time and energy to do everything yourself.

How To Set Your Business Up To Get Paid

In order to improve the collection of your retention money, you are probably going to have to delegate some of the work to others. You will need to decide who is to be responsible for improving retention collection and who is actually going to do what.

Do not fall into the trap of delegating the task to someone who does not have the skill and expertise to do the job.

For your team to be effective, they will have to overcome the likely problems they will experience. Contractors’ accounts departments are good at putting off Specialist Sub-Contractors’ accounts departments when it comes to retention.

You may need to train and develop your people to improve their skills as the collection of retention requires contractual knowledge, persistence, good people skills and a degree of assertiveness.

What Can I Do If I Am Not Getting Paid?

In theory the main contractor should immediately pay out the retention money he has received.

Regrettably, one of the great weaknesses of the retention system so far as Specialist Sub-Contractors is concerned, is that it provides the contractor with a golden opportunity to receive money which he should be paying out but doesn’t.

This failure to pay out may be accidental but more often than not, it is quite deliberate.

The length of time the contractor can hang on to and utilise these windfall monies to run his business, will depend upon your ability to chase him for your money.

Some Specialist Contractors will not be very good at chasing their retention money and some may even write it off altogether. The contractor simply takes advantage of your generosity.

Some main contractors will only pay out if the Specialist Contractor chases him for the money.

Other main contractors will deliberately set out to make it difficult for Specialist Contractors to collect their retention. There are those even less scrupulous who are known to have a system in place for writing your money into their profits after a given period has elapsed.

There is no one simple answer, but once we know all the facts we can come up with the right plan to ensure you get paid what you are entitled to as quickly as possible.

No matter how determined the Contractor is not to pay we reckon we can usually find a way to unlock the cash, so, if you are struggling to recover retention pick up the phone and give me a call.

I hope you enjoyed my Wise Up Wednesday and that it gave you some food for thought.


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Construction’s a tough place to do business right now, and Specialist Contractors need all the help you can get. That’s why you will find our resources and expertise are invaluable, whatever the size of your business and whatever your specialisation. We’re here to help you solve all your business problems, including the crucially important contractual ones, such as getting paid.

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