Back charges can be an intricate part of the construction business. They are often misused and abused and anyone involved may find themselves with their backs against the wall. In a challenging industry to shot a profit in, back charges represent a subcontractor’s entire profit margin on the job. Hence, solutions to these issues do not have to be as crazy and scary.
As a contractor, you need to understand why back charges exist and find solutions when your customers back charge you. The best strategy yet is for you and your subs to avoid these problems altogether, as one. Read this blog to discover some helpful ways to avoid back charges effectively.
What is a back charge?
Construction projects are complex and very complicated, and conflicts over the quality of work are very common. And back charges are one of the most common issues faced between contractors and subs. Back charges refer to the money that is either withheld or charged from a subcontractor in the event of a particular issue. The charges may include fees for:
- Damages
- Equipment Use
- Clean Up
- Incorrect or incomplete workmanship
- Other unforeseen issues
A handshake agreement is not always enough to resolve some mistakes. In circumstances where faulty work and uncompleted projects exist, no amount of backslapping will make the issues go away. That is why beware of back charges because they can become a big deal when profit margins are tight.
Ways to Avoid Back Charges
Below are some tips you can consider, especially when you are dealing with back charges. The list below is by no means exhaustive, yet it provides some imperative advice that can help you protect your bottom line.
Deal with the back charges upfront
As a contractor, one of the most crucial things that you can do in terms of substantiating the back charge is to deal with some issues of back charges upfront, straightly in the subcontract. At the onset, the sub-agreement outlines the mechanism for how those back charges are to be determined and assessed and what rights you need to emphasized and corrected.
1. Document everything
Detailed documentation is the key! You must include as many details as possible, especially when sending notice of some defective work. If the subcontractors decide to take remedial action, make sure to take photos for your records. It is vital to keep the timesheets and invoices regarding the back charges separately. It will be provided to either the vendor or subs upon completion.
Document any issue to the best of your ability using subcontractor scheduling software. Videos, timestamps, photos can be posted in this software tool. Records of any kind can be kept through this modern solution, giving you a complete account of incorrect work and other details.
2. Talk it out
If the costs incurred are due to your mistakes, it is best to handle this all correctly. Take note that the contract is only regulating back charges. It means that you can be creative when fixing such issues. Discuss a solution with everyone involved and consider making arrangements to resolve the issue if possible.
3. Send a Notice of Intent
If you think that the money is being withheld from you unjustly, many options are given to you. For instance, if you and your subs do not cause the problem and back charges are not included in the contract, move forward to the next step.
Send a notice of intent to your state’s regulations accordingly. It only shows that you are savvy enough to know you are being leveraged. Mechanics lien provides strong protection, especially in some cases where workmanship has been called for a back charge.
4. Create the Right Repair Schedule
Not every mistake can be addressed immediately. But it is necessary to coordinate with the other contractors from other trades involved in determining the lapses. Your crew members must be present as well and be there at their immediate disposal.
Meet with the project teams to create a proper schedule and coordinate repair efforts where workers are available to address back charge issues. When conflicts arise while managing construction projects, document all types of actions that are going to be performed so that everyone is on the same page.
5. Improve management methods
Incompetent project task management is another major reason for reoccurring back charges. When you lead a team, you are responsible for creating the right project plan that includes all the necessary elements. You and your team can deliver the project within the deadline, without any conflicts arising.
Back charges can be inevitable, but they can be resolved correctly when there is proper project management.
6. Work Together
There can be a lot of pro quo on the job site. Did you know that companies and contractors today often lend each other a hand, some construction equipment and overlook small mistakes as a partner gesture? In fact, the smoothest job sites are the ones where contractors look out for one another, collaborative and cooperative along the way.
If your company bails one another in the time of need, the favor may come back to your construction company ten-fold. When you help either of the trades and contractors in a bind, that contractor will most likely remember the favor. They will be less likely to make some issues with your team’s minor mistakes. These relationships often result in fewer back charges.
Maintain a Strong Contractor-Subcontractor Relationship
Since back charges often happen between contractors and subcontractors, they often create tension between all parties involved. In this highly competitive industry, cooperation and respect are crucial. Otherwise, things will not work as they should be. As subs are facing mounting pressure to deliver more and more, they are walking a tightrope and squeeze between the margins. As a contractor, you have to constantly monitor their status, progress, and other aspect related to your team. Doing so will prevent any conflicts from arising in the future.
- Responsiveness – a light and positive attitude and a sense of teamwork are essential traits that both contractors and subs should possess. While looking and monitoring past performances, equipment, financials, comparable projects, safety, and payment terms, subs must keep in mind that they are being observed. In every situation, contractors are seeking stability.
- Understanding project scope – building a long-term relationship with one another is an ongoing process. And one way to obtain this is by simply giving insights that reflect detailed information of the project scope. Illustrating the project in detail and describing the approach can help your subs showcase their trade specialty and deep knowledge.
It is crucial to provide a high level of project detail to make it all clear. Having it all clear lessens the possibility of construction defects, conflicts, and disputes. When everybody understands the project scope apart from agreeing to the contracts, back charges are avoidable.
- Standing out from the Pack – As noted, contractors review a wide range of issues when it comes to subs, from the available equipment to their safety plans, including the capability to fuel and maintain equipment. Of course, it is the goal of everybody to build a stronger relationship with each other. One great way to get to this path is by using references and projects to their maximum impact in the qualifying process.
Typically, a subcontractor is required to reference similar projects in scope and size. When it comes to references, the subs should include the references they already know and the ones they are willing to share in-depth.
- Going above and beyond – Once winning a project, it is necessary to go above and beyond and celebrate milestones. Showing how much you care about getting clients and winning projects is important to your team. They need recognition and acknowledgment too. Ensure to celebrate every chance you get together with your team. It is one significant factor in building strong and lasting relationships with these people you are working with.
Improve Team Communication and Planning to Avoid Back Charges
Mistakes do happen, but back charges are the direct result of a communication breakdown. The only way to prevent these things from happening is to simply communicate frequently and openly about any issues that arise. Document your work constantly and thoroughly, including your sub’s progress and mistakes.
Embrace cutting-edge task management programs to avoid conflicts. Notices, photos, and other files can be stored and accessed seamlessly. On top of that, you can track the direction and the progress of your team’s communication and see where it is headed.
Everyone involved on the job and your team appreciate effective communication and documentation. So, you have every reason to invest in construction scheduling software like Pro Crew Schedule. With this software tool that acts as a central hub, you will put everyone in the same place and on the same track, preventing back charges from happening.
Integrated software tools like Pro Crew Schedule benefit you, your team, and just every aspect of your construction business. It leads to better project management, increases productivity, reduces mistakes, and prevents disputes and conflicts like back charges.
