Across the board in the contractor industry, payment terms are usually pretty standard. Most contractors abide by theAmerican Institute of Architects (AIA) standards. The AIA advocates for the value of architecture and gives contractors and architects the resources they need to do their best work. These standards are useful for all sizes of projects, but they make large projects must easier to manage and document. The AIA standards provide assistance to contractors and customers, alike, which helps everyone involved stay on the same page and understand all aspects of the contract and payment terms.

 

These standards provide a simple, organized manner to handle all projects and understand how the contractor is billing the customer. The standards break down all that goes into a project. From employing supervision, clean up, facilities for crew, equipment, and types of work. It provides transparency for the customer, which in turn builds trust and integrity.

While most contractors gladly follow the AIA guidelines, there are some who do not. When this happens, it can cause misunderstandings and leave customers feeling perplexed and frustrated.

Associated Contractors Follows AIA Standards

At Associated Contractors, we follow AIA guidelines to create a clear understanding for everyone involved. The payment terms are established at the beginning of the project, and we provide a complete breakdown of all items and services billed. This ensures that the customer knows exactly what we plan on doing and how we plan to bill for it. We bill the customer at the end of the month for the work that was completed, and they then have 25 days to pay.

Another factor to consider when learning about your payment terms, is most respectable contractors do not accept deposits for their jobs. Unfortunately, it happens, but it’s a bad practice for contractors to require a deposit up front and then never return or credit it back to the customer.

It’s common practice for larger projects to get billed at the end of each month. The contractor will bill for the work that they performed for that month. But, payment isn’t usually required for 20 to 30 days after. The work performed, materials used and other expenses that were needed for each month are kept track of throughout the duration of the project. That way, the customer can always look back at the documentation to know what exactly what they were paying.

Lastly, we have a retainage policy. At Associated Contractors, we strive to have our customers as satisfied and informed as possible. A retainage policy is in place to ensure the customer is happy and satisfied with the work and provides them with a means of leverage. According to levelset.com, it creates a financial incentive for the contractor to finish the project successfully; and it provides protection to other stakeholders in the event of any problems, such that the retained money can be used as an insulation for that risk. We provide a retainage of ten percent until 50 percent of the work is complete and then we drop it down to 5 percent.

We Can Help.

While there is a lot to consider when beginning a new project, working with a contractor that provides transparency is key. This will ensure you are aware and fully understand your payment terms and everything that is involved. If you’re  thinking about beginning a project and have questions,reach out to one of our specialists today. We’d be more than happy to answer questions and help you navigate through the process.

About Author

blog author

George Ray

George Ray is the owner of ACI and has been working in the construction industry for over 40 years. George has worked in the field in numerous roles including Laborer, Carpenter, Superintendent, as well as office roles including Estimator, Project Manager, Sales, Controller, VP, and President. He has extensive experience with pre-engineered buildings and design build.

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