Spotting a subcontractor in financial trouble before they walk off
The drywall supplier's credit manager calls you, not the subcontractor: $44,000 of board delivered to your job is 75 days unpaid. The subcontractor's crew on level 3 has shrunk from nine to five in three weeks, and that afternoon its owner asks you for a $25,000 advance.
Treat a shrinking crew, supplier calls and early money requests as one warning: check what you owe the trade, find out what it owes below it and line up a backup. Check facts before assuming a walk-off. One sign may have an ordinary explanation; several together deserve a prompt conversation.
The signs
- Crews shrink while the work in front of them does not.
- Suppliers call you about unpaid invoices, put the trade on cash terms or take their rented equipment back.
- Requests for advances, and claims that run ahead of the work in place.
- A workers' compensation clearance that lapses; in Ontario, a clearance confirms a business is in good standing with the board.
What you can do within the subcontract
- Check your own side first: a claim you cut or paid late, or approved extras still unpaid.
- Talk to the owner of the business, not the foreman: ask whether its suppliers and crew on this job are paid.
- Ask for proof of payment down the chain: the statutory declaration or releases your subcontract requires with each claim.
- Pay according to the contract and applicable payment rules, against the required proof of work and material. Any proposed advance needs company approval and appropriate security; do not withhold a payment simply because you suspect trouble.
- Take any unpaid supplier debt to whoever manages your contracts: a joint cheque or direct payment, made by the rules, can protect you.
- Price a backup now, and record head counts, supplier calls and every notice.
Common mistakes
- Diagnosing insolvency from one call.
- Withholding payment without a contractual basis.
- Allowing disputed goods to leave unchecked.
What to say
Questions for the subcontractor's owner
Check your understanding
A trade's crew is down and one of its suppliers has called you, but the trade's owner blames slow paperwork. What do you do before the next payment?
Show the answer
Ask the supplier what is owed for material on your job, and ask the trade for the declaration or releases its subcontract requires. An explanation from the party in trouble is not proof.
