Heather Martin

Getting the job is critical. But the contract, payment and invoice terms are equally as important. For example, retainage of five percent instead of ten percent can make a huge difference for your cash flow and profitability. So what do you need to know before, during and after you negotiate the deal?

Prior to being awarded the contract, you should have double-checked your numbers, quantities and assumptions about the job, and then you negotiated a price with your client. But once you receive the contract, you should be careful to check that everything is accurate and that all the terms meet your conditions, especially as discussed in the negotiation phase.

Contracts contain volumes of details; however, an initial review of the contract documents should include the following checklist of basic items to ensure that the contract you sign will not adversely affect your company’s bottom line:

  • Scope of Work: Ensure items and quantities are accurate and reflect your bid proposal.
  • Price: Review the price and make sure it is correct.
  • Retainage: Confirm percent of retainage. Certain projects will be 5 percent, not 10 percent, and that can make a big difference for cash flow on a job.
  • Confirm terms of Pricing: Does it include or exclude weekend, holiday or evening work? Does it assume liquidated damages? Are you responsible for hoisting, scaffolding, surface preparation or acquisition of permits?
  • Schedule: Confirm the project schedule and any liquidated damages that might be associated with delays. Determine if heating is furnished by others, should the job get pushed to a winter time installation.
  • Payment Terms: Is the payment net 30 or more? Does the contract specify that you will be paid once your client is paid? Is there a clause in the contract that allows you to stop work legally if payment is not received in a reasonable amount of time?

The above are a few of the critical items to check when reviewing a contract.

Remember, getting the job is only half the battle. Review the contract carefully to ensure you don’t get any surprises once on the job...

Once the contract has been reviewed and fully executed, invoicing is the next contractual issue that can make a big difference in your cash flow. Once you have performed the work, it is critical that you invoice in a timely manner. Most clients expect to receive your requisition for the current month by the 25th of that month, projected through the billing period. But some projects invoice bi-weekly or have other expectations for receipt of your invoice. It is helpful to know the expectations of your client, prior to starting the work in order to help expedite your payments.

Most clients will accept standard AIA requisitions, but it helps to have a conference call or pre-job meeting to discuss details of invoicing prior to beginning work. Some clients require special formatting or have their own requisition format that they want submitted. It is important to know the following about invoicing before you start:

  • When does the client want the requisition by?
  • What format do they need?
  • Has your schedule of values been accepted?
  • Who should you send the invoice to?
  • What are their terms of payment with you and with their client (if they are not the owner)?

Remember, getting the job is only half the battle. Review the contract carefully to ensure you don’t get any surprises once on the job, negotiate payment terms that work for you, and make sure you get invoices in on time. If you can get the work and get paid in a timely fashion, then you can help to maintain your bottom line.

Heather Martin is currently the Vice President of Sales for EAI Inc, an environmental consulting and contracting company based in Jersey City. She has extensive experience with the installation of gas vapor barriers and other services related to brownfield redevelopment in the tri-state area.