Debt Collection for Contractors “Facts, how to avoid, and how to handle” - Nexum Group Inc | Florida Debt Collection Agency

Debt Collection for Contractors “Facts, how to avoid, and how to handle”

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Debt Collection for Contractors “Facts, how to avoid, and how to handle”


What exactly is happening with construction companies’ accounts receivable? There are naturally smaller or fewer construction jobs but the few lucky companies who get these jobs are also finding it hard to get paid.


Research has shown slow, incomplete and erratic payment for finished jobs is one of the very common and distressing issues affecting or plaguing today’s construction companies. Procedures below here are simple, comprehensive and easy to put into place to mitigate these problems.

  1. Utilize a good and solid automated billing system. Software should have the ability to: consolidate all customer fees and transactions into one invoice; integrate with existing programs and files; provide billing formats that can be customized according to client; and allow the business owner to review and revise invoices before delivery.
  2. Request a deposit. Asking for a share of the money up front has become a standard practice in the construction industry, and with good reason. Besides covering start-up costs, the revenue can go directly into other company expenses, which contributes to a steady cash flow.
  3. Try the “pay-as-you-go” approach. Setting down a series of deadlines and payments over the course of the job, in the original contract, allows the business owner to stop work (thus extending the terms) when a client fails to meet his obligations. The consensus among industry insiders is that by a project’s completion, a very small balance of monies owed should be outstanding. Some contracts leave as little as five percent of the total cost.
  4. Allow for changes. An initial written agreement always should include a policy statement regarding subsequent modifications in design, labor force, cost and materials. By the same token, when a client requests a variance from the original contract, the savvy business owner will put these terms in writing, too. In some states, this already is the law. Include all new costs on the statement, and then bill immediately.



A reoccurring situation that collection agencies face is the request to add-on or collects, the collection fees charged to the client for the collection of the account.   While tempting, adding interest, service fees and collection costs to a delinquent account could result in unwanted legal attention.

  1. Section 808(1) of the FDCPA [15 U.S.C 1692f state that the collection of interest, service fees, collection cost or other expenses to the original debt is permitted when “such amount is expressly authorized by the agreement creating the debt or permitted by law”(emphasis added).
  2. The contract that creates the debt must specify what the interest rate, late fees, services fees, or other charges are going to be and must be signed by the consumer before a creditor can legally add them on to the debt. 
  3. You need to be careful, just because you have a contract stating collection fees will be added, doesn’t always make them collectible.  The fees being added must also be permitted by law.  For example, if the consumer signs a contract stating they will be charged a $500 collection fee if the account is referred to collections, and the state law prohibits the collection of such fee from the consumer, it won’t matter what the contract says, the creditor will not be allowed to charge that fee.




  1. I was talking to my brother the other day about his recent project. He was looking into construction debt recovery and other ways to avoid losing too much money. I will let him know that he should allow for change.

  2. Nexum Group says:

    Hey Alexandria, we appreciate your ambition to learn how to avoid delinquent accounts and handle them when they do come about. If you are in business long enough, usually it is something every company runs into. Try your best to recover what you can, feel free to contact us for collections or credit reporting. I usually say try for 3-5 months before sending them, unless you are getting no response and know they are trying not to pay. Let us know if you have any further questions!

    Thank you,


  3. Yes, I totally agree with what you said. I also ask an upfront payment from my clients too. It help me start the project as early as possible and help me to have a stable cash flow. Thanks for sharing this article.

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