Volume 36, Issue 9, September 2001
Where's My Money?
Proactive Strategies to Help Contract Glaziers in their Quest to Get Paid
- by Andrew T. Gum
Is there anything more important? Obviously, there are many other aspects of the contract glazing business that are critical to our success and survival. Sales, production and people come to mind and are all necessary elements of any business. However, without cash, none of the other components can exist, which is why proper capitalization and cash flow are the most important aspects of any business—especially contract glazing!
I have grown up in the glass business, attended various meetings and met a variety of people. Throughout my travels, seminars and personal experiences, I have concluded that the majority of the glass industry does not really understand the financial side of contract glazing. With that said, please step into our world.
Typical Glazing Situation
Come with me, if you will on a journey experienced by many contract glaziers …
On May 1st, you mobilize your equipment and people on site.
Your fabricated aluminum products are delivered to the site on May 5th and installation of the materials begins immediately.
The insulating glass is delivered on May 10th and all is right with the world. Everything fits and labor factors seem to be on target. The material invoices are flowing and have been approved for payment.
On May 25th you submit your application for payment to the construction manager as outlined in the terms and conditions of your contract. He doesn’t think you’re actually 58 percent complete, he thinks it’s more like 56 percent, so he reduces the invoice accordingly and approves it for submission to the architect and owner.
On June 15th your work, including the additional work you’ve been directed to do verbally, is substantially complete. No change orders have been received. There was no time for a change order and the additional work had to be completed quickly so the owner could move in by the 20th since his existing lease had already expired. Your accounts payable department gives you a note that the aluminum and glass suppliers have called requesting payment for their May invoices. You call the construction manager immediately to find out when you can expect to be paid for your May work. He explains that the May invoice was just approved by the owner and they do not have a payment schedule. He states, “you’ll be paid when I get paid” and refers you to the pay-when-paid clause in the contract. Before hanging up he provides a friendly reminder that your punch list must be completed by the 20th to avoid liquidated damages.
June 25th rolls around and it’s time to invoice for the balance of the project. Even though the change orders still have not been received, you go ahead and bill for them anyway. You’re promptly informed that you will have to wait until July to invoice for the extra work since the proper paperwork and signatures aren’t complete. You receive a nasty-gram from your aluminum supplier advising that if they aren’t paid by the first of August they’re going to place a lien on the project. You cut a check to the aluminum and glass supplier paying them in full for the materials.
You call the construction manager and request a payment schedule for May’s draw and are informed that the owner will be cutting the check around July 15th.
On July 15th you call and ask if the check was cut and are told everything is in line, and the owner’s funds have been sent to Chicago to be processed through the construction manager’s home office. When you express your discontent with the process you are directed to your contract which states, “the construction manager has seven working days to process funds and pay his subcontractors.”
On the 22nd you once again call and are told the checks have been mailed from Chicago and will be available at the jobsite by the end of the week.
On Friday you call to pick up your check, and are informed that they received the checks from Chicago, but the controller from their local office is on vacation and won’t be back until Monday. All of their checks require a signature from the home office as well as the local office.
You pick up your check (less the 10 percent retainage that was withheld) late Monday afternoon—90 days after the project’s start and more than 60 days from the invoice date. You resist the urge to complain since this is one of your best customers.
I can already hear the sounds of industry suppliers reverberating across the job sites … WHAAaaa! I have had this same discussion with many vendors through the years and some are very understanding and accept the 60-day terms required to finance projects. Many however, feel these payment issues are the glazing contractor’s problem, and their terms of net-30 days must be strictly enforced.
I recently had the privilege of chairing the Kawneer PartnerPanel. This was my second year on the panel, and my job was to formulate and relay, in order, the most important issues facing Kawneer dealers. Surprisingly, the number-one issue this year was credit policies. I was particularly surprised by the outcome, considering the panel consisted of eight very successful and well-capitalized glass companies. The general consensus of the panel was that their companies have historically migrated towards vendors that are easy to do business with. This further illustrates the need for more understanding and dialogue between glazing contractors and industry suppliers.
Before you tell me to quit complaining about contract glazing and get a job at a tempering plant, I would like to state for the record that I really do enjoy contract glazing. Although this may sound like whining … I’m really not. OK, maybe a little. The cash flow and financial side of the business is certainly a source of stress and frustration. Here are a few ideas to help ease your pain:
• Keep the line of communication with your suppliers open. If you have a slow-paying customer, get with the credit department early
and try to arrange extended terms.
• Stay honest. It only takes one dishonest act to lose your credibility.
• Don’t be afraid to ask for the status of your money, no matter how good the customer.
• Strive for better contract terms.
• Be proactive with your receivables and payables. Don’t be a fireman.
If you don’t have a line of credit with your bank, you might want to consider getting one. A credit line will provide you with the additional cushion you need to finance slow-paying projects. With the current interest rates being so low, you can also make money discounting your invoices.
Our partnerships with our suppliers has played a significant roll in the success of our company. Being proactive and communicating is the key to successful partnerships. Cash flow is paramount as well as the awareness of the market in which you sell your product. Glass may be the primary product in which we all specialize, but financing is a close second.
Andrew T. Gum is president of Thomas Glass Co. Inc. in Columbus, Ohio.
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