A stumbling block for many remodelers is job closeout. When is a project ever “done” in the minds of both the client and the remodeler? For many, "done" seems almost impossible, and unfortunately, all too often when this is in the mind of the client, they are often compelled to withhold final payment.
Here are the strategies that successful remodeling firms take to avoid this from becoming a problem for them.
Start at the Beginning
It's essential to set expectations early and be clear with clients about how your company handles job closeout. If you don't articulate this, each party has a different, half-reasoned idea about how it’s supposed to be handled.
When you’re in the sales process with the client, describe how your company handles job closeout. These are some of the expectations you should set:
Focus on "done." Mention that you and your people will be focused on getting done with the client’s project from the day the project starts.
Emphasize schedule. Address the fact that your company always shares the schedule with the client. Be sure to set the expectation with the client that the schedule is a planning tool and that the actual course of events will likely shift as circumstances during the job require. Affirm that the company is taking the scheduled completion date very seriously.
Change orders. Mention that there will likely be at least a few change orders. The ones coming from the remodeling company will be driven by hidden conditions and will likely occur early in the project as the demo is done. The changes coming from the client will probably occur because the client will want to improve the original plan and/or scope as he or she starts to see their dream become reality. In any case, a change order must always address three things:
- a change in SCOPE,
- a change in COST, and
- a change in the SCHEDULE.
By always mentioning the schedule and any changes made to it, the client will be more likely to remember the revised date, not the original completion date.
The Completion List
In setting expectations, you also need to speak about how the company handles quality control. A good practice is for the lead carpenter to keep a running list of outstanding items. I like to call this the completion list.
At the beginning of the job, the items on the completion list will be taken directly from the scope of work and the estimate. As the job unfolds, the lead carpenter will cross out the items from those two documents that become 100% done.
Weekly meetings. It's vital that the lead carpenter or project manager engage the client in making sure that the completion list is always up to date. It’s a good practice for the lead to have a weekly meeting with each client he or she is managing. The best time to establish this practice with the client is before the job actually starts, so the client understands his or her responsibility in making this happen.
Often, when I mention this to the lead, I hear, “But what if there is nothing to talk about?” Truth is, there is always something to talk about.
At the very least, having this regularly scheduled interaction on the same day and at the same time each week allows the homeowner to keep the lead carpenter current on any issues or concerns.
During these meetings, the lead carpenter should always write down what is being said, and as the discussion about an item unfolds, he will work to resolve the matter with the client. For each item, this is best done by the lead carpenter always addressing:
- WHO is responsible for the item;
- WHAT exactly will be done;
- Whether or not it is a COST issue;
- And BY WHEN the item will be completed.
The items addressed in the weekly minutes that the lead carpenter or production manager write become part of the completion list. By committing to this practice every week, it makes it unlikely that the client will have a long list of issues to present to the lead carpenter at the “end” of the job.
Clearly Define "Substantial Completion"
An important part of setting expectations with the client before the project starts is to define “substantial completion” and its relationship to the final payment being made.
At substantial completion, the project can be used for its intended purpose. For example, while there may be a cabinet handle, or the like, on back-order, the client can still use the remodeled space as it was intended to be used.
You should address with the client which thing (or things) are outstanding and agree on what those items are. Agree upon the value—the cost—of each item, then add up the costs and double that number. That amount is what will be deducted from the final payment, which is made once substantial completion has been achieved and the client is using the space.
After you see to it that the agreed-upon items are taken care of, the client pays you the money that was held back.
Don't forget to include it all in the contract. It’s essential to have language in your contract that addresses everything above. Be sure to review this part of your contract with the client when she is signing it. This will go a long way towards avoiding the client holding back your final payment because of a missing cabinet handle!