In the construction industry, it is a bit of tradition to shut down for at least 3-6 weeks over the Christmas break. For some members of our industry it is the one time each year to recharge before ramping up for the next. But as a business owner, it can be a tricky balance.
It is all good to shutdown to recharge, but if you are not working, you are not earning. For those of us who have been in business for a while, the tightening of cashflow come the end of January is an all too familiar memory.
However, just like anything if you are proactive and work in anticipation of the January cashflow crunch, you can avoid the worst of it. So we can share a little of our Aitchison Reid Building and Construction Lawyers expertise and guidance with you, here are our three top tips:
1. Know your debtors and your disputes
For those of you who send your payment claims between the 25th and the last day of the month, you should know by mid-November if you have any payment schedules disputing your October payment claim.
For the builder, disputing the October payment claim is a great way to increase the builder’s own cashflow over the January period, so do not be surprised if you experience some form of push back.
If you have received a payment schedule disputing your claim, you have 30 business days to apply for adjudication. Given that the BIF Act also respects the Christmas shutdown from 20 December until 10 January, you may have until January to file your adjudication application. But the question is do you want to wait until January to make an application?
If you are filing an adjudication application for your October payment claim, you should do so on or before 2 December or after 13 January, otherwise you will be giving the builder extra time over the Christmas period to prepare its response to your application.
All too often we are receiving calls from subbies who have left enforcement too late and cannot sustain the delay of enforcing payment. So it is really important that you deal with any non-payment as early as possible because adjudication, although it is very quick compared to court, still takes at least 4 weeks from the date that you file and serve the application plus the time for enforcement of the award. Enforcement of the adjudication award can take a number of months depending the method of enforcement and the willingness of the payer to pay.
2. Claim for Variations Now
Whoever thought waiting to claim all the variations at the end of the job was a smart idea, is one variation away from business failure.
If you carry out a variation, claim for it in your next payment claim! Let’s face it, you will not be able to delay having to pay for the labour or the materials, so you should not delay requesting payment. Otherwise you end up playing bank to the builder and the building owner.
We understand that claiming for a variation at these times may mean having a tough conversation earlier than you would like and it could mean relationship issues, but wouldn’t you rather know if someone isn’t going to pay you earlier?
As a subbie on site you have far more leverage than a subbie who has done all its work and is off site.
3. Make sure your December payment claim is valid
Although it may be easier for your accounts team to send your payment claim before 20 December for your accounts team, it will not be a valid payment claim unless it is sent after your reference date. As reference dates are usually the 25th of the month or later, the likelihood is that if you send your payment claim before 20 December it will not be valid.
How can you fix this? Send it again after your reference date.
Please note, lots of builders will also be requesting your payment claim before the 20th of the month so their team can process it. Their request DOES NOT change your reference date and DOES NOT make your payment claim valid.
For example, your contract says that you can send your payment claims on the 25th of the month. The builder emails you on 5 December saying that if you do not process your payment claim by 15 December you will not get paid. You can send an invoice before 15 December, but then after 25 December send it again. This way you help the builder process payment to you, but also protect yourself just in case you don’t get paid and you need to enforce your payment claim.
Contact Us
If you want help using adjudication to get you paid, use our Adjudication Application Pack to help you file for your October 2019 payment claim on or before 2 December 2019 or after 13 January 2020.
If you want to get your business up to speed on how to use the BIF Act's security of payment provisions to help you get paid, have your administration and support team to do our high quality very low cost online course, "A Subbie and Trade Contractors' Guide to Getting Paid Using BIF Security of Payment".
For any building and construction matters needing legal help and advice for you and your business, call us on 07 3128 0120 or email subcontractors@arbuildinglaw.com.au.
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