How to Respond to Delinquent Construction Client Objections to Collections

How to Respond to Delinquent Construction Client Objections to Collections

August 25, 2021

Dealing with delinquent clients is one of the toughest challenges for contractors, subcontractors, and material suppliers. Delinquent clients in construction are clients who do not pay on time or, worse, who do not pay at all.

Having too many delinquent clients can clog your business’ cash flow. A messed-up cash flow can be a major financial problem for your company, especially if you sell most of your products on trade credit.

Material suppliers who deliver materials without asking for immediate payment must be wary of delinquent clients. Delinquent clients are a huge credit risk, and they can cripple your business altogether.

Managing construction debt collection

Construction companies, including material suppliers, must have a robust process for debt collection. When invoices are long overdue or when agreed contract amounts are not paid in full, you need to have a set of procedures and standards that will ensure that you recover your hard-earned cash.

Note, however, that debt collection in construction is not always about pursuing or recovering payments from your clients. It also involves being proactive by trying to prevent late payments from happening, as well as making sure that you preserve your lien rights so you can file a mechanics lien if needed.

Why is payment collection a big challenge in construction?

To protect yourself from the consequences of late payments and unpaid invoices, you need to understand why construction payment collection is a complex problem to begin with. Some of the reasons include the following:

  • Complex payment hierarchies

    The construction industry follows a complicated and hierarchical payment process. For example, a subcontractor who orders materials will not necessarily have the money for those materials until they finish their deliverables for the general contractor. The general contractor must pay the subcontractor before the subcontractor can pay for the materials that they ordered.

    A problem ensues if, at some point during the payment process, one of the involved parties does not pay up on time. There can be a domino effect of late payments, and this can be detrimental to any of the parties who do not have the financial stability to cushion the blow.

  • Unexpected changes in deliverables

    Sometimes the deliverables required for a project can change, and this can have a huge effect on payments. Say, for instance, that a project’s design was incomplete and insufficient, and the general contractor had to purchase more materials to complete their work. Without proper communication and approval from the top-tier stakeholders, this can lead to a major payment dispute.

    The general contractor will most likely charge the owner a higher amount to cover the additional materials. The property owner will most likely contest the charge if it was not included in the original contract or if it was not executed through a change order. The payment dispute could lead to late payments, and the material supplier will have to find ways to get their cash flow going and recover their due compensation.

  • Delinquent customers

    Late payments happen for various reasons, and sometimes it’s because of the clients’ own shortcomings. If a client does not manage their cash flow properly, they may end up owing money to multiple parties, and this can have a huge impact on the cash flow of those respective parties.

    There are also multiple reasons for how a client can mismanage their cash flow. For example, a client may take on a big project without planning in advance for how to fund it. If payment disputes arise, they may end up short on cash, so they will not be able to settle their outstanding balances on time.

Common delinquent customer objections

Common Delinquent Customer Objections and Excuses

  • Late invoices

    One common excuse among delinquent construction clients is not receiving their invoices. They know that without an invoice, they will not know the amount that they need to pay their material suppliers. While late or missed invoices can happen, be wary whenever a client says that they are still waiting for an invoice as they can just be stalling.

  • Late payment processing

    Another excuse is late payment processing. This usually involves a check being lost in the mail or an online banking glitch that is causing delays in credit card transactions. Take this excuse with a grain of salt as it can also be another form of delaying the payment.

  • Misunderstood contract clause

    Delinquent clients can feign ignorance just to further delay their payment obligations. For example, a client might say, “We thought payments were due in 90 days, so we did not process the payment yet.” Be wary of this excuse, especially if they use it on you multiple times.

  • Disputed invoice amounts

    As mentioned earlier, payment disputes are common in construction. Sometimes the clients are not trying to delay payment – they may actually have an objection against the amount that you are charging them. Unlike the previous excuses, this may require further escalation and investigation before it can be settled.

How to respond to payment collection objections in construction

How to Respond to Payment Collection Objections in Construction

  • “We don’t have the invoice yet.”

    Even before making the payment collection call, you need to verify that the invoices have been issued and sent to your clients. Without an invoice, your clients will not know how much they need to pay, what for, and when.

    Proper invoice management is imperative in construction payment collection. If your invoices are all over the place, it will be difficult for you to verify if your client is telling the truth or not. And if your invoices are always issued late, you will have a hard time managing your cash flow and preventing major financial mishaps from happening.

  • “We already sent the check.”

    Some objections can be accepted the first time it happens. If a client says that they have sent the check or have processed the credit card payment, you can give them the benefit of the doubt. However, always ask for proof of payment and be sure to follow up. Make sure that they email you the payment transaction records so you have a backup.

    Additionally, you need to remind them of the payment deadlines. Put your foot down and explain that you need to receive the payments on the due date. Consider charging a late payment charge, especially if they are repeatedly using this excuse.

  • “We thought the deadline was in 90 days.”

    When your clients are not aware of the payment deadlines, it can be due to your failure to communicate. Make sure that your contract agreement clearly states the payment schedule and ensure that the due dates are communicated through the invoice. Do not hesitate to overcommunicate. For example, you can send automated payment reminders as the due date approaches.

    If a client uses this excuse, be sure to review the client’s portfolio to see how many times they have used this objection before. You will know if a customer is delinquent if they repeatedly feign ignorance about something that you should have communicated to them multiple times already.

  • “You’re charging the wrong amount.”

    You need to take payment disputes seriously. First, review the client’s records and make sure that there were no typographical errors in the invoice. Second, ask the client why they think they are being charged the wrong amount. Take good notes and be attentive to details. Payment disputes need to be investigated to know if you made a mistake or if the client is simply trying to get more money.

    In cases of disputed payments, it is imperative that you have a robust contract agreement with your clients. Most disputes in construction can be fixed by simply going back to the contract and understanding who should get paid how much. Without a clear and solid contract, you might end up having to escalate the issue to a full-blown legal battle.

How to deal with delinquent customer objections in construction


  1. Be proactive.

    Being proactive means doing all possible and reasonable precautions to address any potential excuse by a delinquent client. For example, sending payment reminders through multiple channels – emails, text messages, snail mail – can stop a client from saying that they did not know about the payment schedule.

    Opening communication lines at the beginning of a project is also another way to be proactive. You can send a preliminary notice to all top-tier parties, including the property owner, to communicate to them that you are willing to file a mechanics lien if you do not get paid. This demonstrates not only professionalism but also your seriousness in taking all necessary measures to secure your payment.

  2. Be quick.

    If a client communicates any issues or concerns to you during a project, you need to act right away. For example, if they order materials that were not part of the initial agreement, be sure to execute a change order or a new contract to ensure that their payment obligation is put on paper.

    The same applies if a client asks a question – you need to reply to them right away to prevent any communication gaps from happening. For instance, a client might inquire about the payment methods that you accept other than checks. Be sure to tell them right away, as this can help you get paid faster.

  3. Be organized.

    Being organized does not only refer to documents and other paperwork. Your processes and procedures should also be organized and communicated to all your team members. Ideally, you need to establish a clear set of standard operating procedures for dealing with late payments. Smaller companies may assign one or two people to handle late payments, while mid to large-size companies should establish a whole internal team to deal with past-due accounts.

    Assigning specific people or committees to handle past-due accounts is necessary because of how common late payments are in construction. However, you should still be proactive and do everything you can to prevent late payments from happening in the first place.

Preventing common payment collection objections


  1. Strict late payment penalties

    Charging late payment fees is one way to discourage clients from paying way past the due dates. If a client knows that they can end up paying more if they do not pay on time, they are more likely to try and do their best to keep up with their payment obligations. Alternatively, you can also offer early payment discounts to incentivize your clients who pay before the deadline.

  2. Constant communication

    Communicate constantly with your clients to avoid any gaps from potentially causing a payment issue. Send preliminary notices at the beginning of a project. Automate payment reminders as a payment deadline approaches. Do not hesitate to reach out to clients, especially those who are considered high-risk.

  3. Clear and robust contract agreement

    Remember that most payment disputes can be easily resolved if you have a robust contract, to begin with. If a contract is written with the flimsiest details, it will likely lead to more disputes, and the issues can even escalate into expensive lawsuits.

Construction payment collection tactics


  1. Execute a robust contract agreement.

    A robust contract agreement is an agreement that is laced with clear provisions and terms. It is written in a detailed and specific language, and it itemizes the payment obligations of your clients, including the necessary fees and penalties. A good contract also specifies the responsibilities of all parties involved to avoid pointing fingers in cases of disputes.

  2. Train your payment collection team effectively.

    An effective credit team needs to have the right knowledge and skills to be able to do their job well. If you want to ensure that your trade credit policies are properly implemented, make sure that your credit team knows the policies by heart. You also need to make sure that they know how to handle collection calls and how to utilize the necessary key performance indices of KPIs for payment collection.

  3. Vet your clients right from the get-go.

    Your trade credit policy should detail how you approve or reject potential clients. You can reject high-risk clients, or you can approve them but with a lower credit limit. Group your clients together depending on their risks and loyalty to the company. This way, you can easily prioritize and plan the necessary actions on how to mitigate the payment issues that can harm your cash flow.

Tips for effective construction payment collection


  1. Know and understand your trade credit policy.

    Your trade credit policy reflects your company’s vision and mission. Different companies have different priorities and values. Therefore, you need to know your own trade credit policy by heart in order to properly implement it.

    For instance, some companies would rather be more stringent in accepting clients. If a potential client has a long history of being delinquent, they automatically get rejected. Other companies are more accepting, but they ensure that the credit limits are set accordingly. If you understand your company’s trade credit policy, it would be easy for you to prioritize and make sound decisions.

  2. Never make a payment collection call unprepared.

    There are many factors to keep in mind when making a payment collection call. One of them is to always be prepared before dialing the client’s number and making the call. Preparing for a payment collection call means thoroughly reviewing your client’s portfolio. For example, you want to make sure that your client has already received the invoices in question.

    You also want to know how long they have been with your company, how many times they have missed an invoice, or if there are any other important factors to take into consideration. When you are prepared, you are in better shape to answer their questions and secure a commitment to pay from your client.

  3. Organize your records at all times.

    It is difficult to review a client’s portfolio if your records are not properly filed and organized. Being disorganized not only affects your payment collection efficiency but can also impact how quickly you address your clients’ inquiries and how well you manage your cash flow.

    Take advantage of existing technologies to stay organized and to keep up with your growing client base. You can invest in invoice management software to manage your invoices, or you can also utilize existing technology to synchronize all your records in one place.

Further reading