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Dealing with Late Payments: 6 Tips on how to Ensure Clients Pay on Time

Updated: Apr 22

So often in my career, I have entered a construction site or someone's home to resolve conflicts between a client and a contractor. Most times, it has been difficult for me to be seen as an independent party, as I represented a supplier. However, with the formation of DPS Consulting, I can now reassure clients that I am there to represent the best interests of a fair and reasonable outcome. Even in my previous positions, my main goal was to preserve the brand by ensuring the works complied with the building code, ensuring the client received a decent product, and the contractor got paid.

There are options available to both parties before a contract reaches a point where money is withheld. However, sometimes, the only power a client feels they have is the ability to withhold payment - and so that is the course of action that is taken - withholding payment.

Mostly, it comes down to communication....and paperwork!

There is a requirement under the Building Act 2004 for the following checklist to be completed if:

a) The homeowner requests the checklist; or

b) The building work is more than $30,000 including GST.

If you also follow these procedures for contracts less than $30,000, you could save yourself and your business a lot of communication issues down the track, should a dispute arise.

Let's face it; there is a high likelihood of disputes. The difficulties of finding capable staff can lead to delays, the increasing cost of materials can lead to increased onsite costs, and so on - disputes can happen. How your business and your team respond to those disputes can create far greater issues along the line, or your reaction could resolve the issues as they arise without the need for your client to withhold payment.

If you saw the previous post on works requiring a contract, you will know that any work greater than $30,000 requires a contract - a free downloadable PDF copy of NZS:3902 is available from Standards NZ.

But did you know that all building work must comply with the provisions of the Building Act 2004.

You can find a copy of the Building Act 2004 on the New Zealand Legislation website, which is not the most riveting reading. But, it is essential reading!

Building work is any work done in relation to the construction or alteration of a building. This includes any work done on your home or other structure, such as a garage, retaining walls, and fences. It also includes work like painting, decorating, and landscaping if it is part of the construction or alteration of a building.

However, if the only work you are getting done is redecorating and there is no construction or alteration work involved, it is not building work. If landscaping work does not include any structures (eg, pergolas or retaining walls), it is also not building work).

All building work requires a building consent unless it is exempt under the Building Act 2004.

Generally, only simple or low-risk work is exempt from the requirement to have a building consent. Certain gas and electrical work is also exempt. For more information, go to

Building work that is significant or of higher risk (such as structural alterations) requires a building consent and must be carried out or supervised by a licensed building practitioner. For more information on these requirements, click the following button:

building and construction late payments | DPS consulting NZ

Practical Strategies for Ensuring Timely Payment

The construction industry in New Zealand, as a key driver of the country's economy, faces unique challenges, particularly in the realm of payment. As a leader in providing consulting services, DPS Consulting not only understands these challenges but has provided the following effective strategies to improve prompt payments and minimise disputes.

Common Payment Challenges

One of the most pressing issues in the New Zealand construction industry is the problem of delayed payments. Factors contributing to this include:

  • Disputes over work quality or compliance: These can halt payments as parties work through resolution processes.

  • Cash flow problems within the payment chain: Often, payments are delayed because previous payments in the chain have not been received.

  • Contractual misunderstandings: Ambiguities or misinterpretations in contracts can lead to withheld payments or extensive negotiations.

Tips for reducing the number of late payments

To mitigate these challenges, DPS Consulting recommends several strategies that companies can implement to enhance their payment processes:

Tip #1 - Have a written contract (free options available online!)

- Clear Contractual Agreements

Ensure that all contracts are clear and comprehensive. Define the scope of work, payment terms, and dispute resolution procedures explicitly. Use plain language and confirm that all parties agree on the terms before work commences.

Tip #2 - Agree on the project structure and management

- Robust Documentation

Maintain meticulous records of work done, adjustments made, and communications between parties. Good documentation supports claims for payment and can expedite the resolution of disputes.

Tip #3 - Ensure your client is informed of the work you intend to undertake

- Effective Communication

Keep open lines of communication with all stakeholders, including clients, subcontractors, and suppliers. Regular updates and meetings can prevent misunderstandings and alert you to potential payment issues early.

Tip #4 - Ensure your team is competent to complete the work

- Use of Technology

Implement construction management software to track project progress, budgeting, invoicing, and payments. Technology can reduce errors, streamline operations, and provide transparency across all project stages. This can include ensuring your team is up to date on training and current building practices.

Tip #5 - Agree to the price and payments schedule

- Payment Escalation Procedures

Develop a formal procedure for addressing late payments. This might include sending reminder notices, conducting follow-up calls, and, if necessary, legal action.

Tip #7 - Inform your client of dispute resolution pathways.

- Financial Cushion

Maintain a buffer of funds to manage your cash flow effectively during periods of delayed payments and disputes. This can help sustain operations and reduce the need for costly short-term financing.

Tip #6 - Take control of the project; if an issue is lingering, communicate, deal with it, and don't let it fester

- Legal Advice

Engage legal professionals who specialise in construction law to review contracts and handle disputes professionally. Legal expertise is invaluable in navigating the complexities of construction agreements and regulatory compliance.  This ensures they know that withholding payment is not a good option.

Even in the times of construction boom, the New Zealand construction industry presents challenges that can impact business operations. However, These proactive strategies not only stabilise financial operations but also contribute to the overall health and sustainability of small businesses within the construction industry. By implementing these tips, businesses can shield themselves from payment issues and position themselves for long-term success in New Zealand's vibrant construction sector, fostering a sense of hope and optimism for the future.


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