#WiseUpWednesday: The Scourge That Is Retention
Retention is a scourge on the industry, and I’m sorry to say it will be with us for some considerable time.
And if your actual profit after overheads is as low as 3% to 5% of sales, and Contractors are hanging on to 2½% of sales, they are effectively hanging on to your profit.
Yet collecting what’s rightfully theirs is not usually on most Specialist Contractors’ list of priorities.
In most Specialist Sub-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.
How To Set Up To Get Your Money Back
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 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, because Contractors’ accounts departments are very good at putting off Specialist 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.
When Should You Get Paid?
In theory the 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. If you are not very good at this game the Contractor simply takes advantage of your generosity.
Most Contractors will only pay out if you harass them for the money…
What If You Struggle To Get Paid?
Please do not struggle alone, this can be tough, so please be re-assured that it’s not just you that struggles with this. The best way to improve things is to either;
- set up a more robust system
- understand exactly what it takes to get paid
- check out our page for more information: Retention
- let someone like us do it cost effectively on your behalf
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 us a call on 01773 712116 or email us email@example.com.