He’s offered a discount for cash payments, but we’re concerned about our potential exposure if something goes wrong.
You should be able to pay how ever you want. Just make sure you get a paid in full invoice. This way if something goes wrong a few months down the road you have a record.
Cash payments are rare. First, NEVER! NEVER! pay anything up front. Based on scope of projects Z Construction will require payment upon completion or in the case of larger projects, payments upon completion phases invoiced as project progresses. You will want to retain invoices and payment records for taxes, insurance and home value improvement records. Z Construction also extends workmanship warranties with all projects and product warranties require records as well.
You will always get a better quality project when a contractor provides proper documentation.
Bottom line… Everyone wants their project done right. If you cut corners you will ultimately be the one stuck with paying the price in the end.
John Z. owner at Z Construction
Sometimes unscrupulous contractors want to be paid in cash so it doesn’t hit their bank records and they can avoid paying taxes on the income. This doesn’t really affect the home owner unless the contractor doesn’t pay the supplier. In this case the supplier could lien your home. I would make sure the contractor is properly bonded, you get a receipt for every payment made and you verify with the material manufacturer you will be receiving whatever type of warranty has been sold to you by the contractor.
If possible, you should pay with a check or some form of financing/credit card. (You should be able to get a cash discount if pay with a check.) A reputable contractor will provide you with a paid invoice and a release of mechanical lien if requested. The advantage of paying with a check over cash will be additional proof of payment.
Yes you should be. Most unlicensed contractors want to be paid in cash. Never pay a contractor in cash. Always pay with a check made out to their company name, so you can have a paper trail if you need to take them to court.
You can get your discount, pay cash, but make sure to get them to sign a receipt for each payment. Best of luck!
These days if anybody is asking to be paid in CASH a flag should go up instantly…
We all need records of payments and receipts for labor and materials.
Questions I would ask: Does he have current insurance and proper licenses for the
proposed work to be done? If paying in cash make sure you don’t out pay more the the work
performed or another possible problem could arise: Where has my contractor gone to!!!
If the job is finished to YOUR satisfaction, then you can pay in cash, as long as you receive a receipt for the full amount you paid. Never pay in cash before the entire job is FINISHED, receipt or no receipt.
Make sure to get the invoice before you pay and check with state that Contractor’s business is registered.
If you pay the contractor in cash, especially for down payment, what kind of proof will you have that you actually gave him a certain sum of money? So, I would make sure that you sign the contact before handling any money. Make sure it is written in the contract how you going to do your payment process (for example 25%, 25%, 25%, 25% or 50% and 50%, or 5% and 95% after completion). Always pay with check and get the receipts for everything you made your payments for.
Hi Manuel,
Great question! You are representing the majority of home owners that don’t know if they are being taken for a ride. The first thing you should do is check your local Consumer Affair laws - they vary per state. A contractor that wants cash payments is most probably going to cause you grief because he is already trying to con the United States Of America out of their tax money. I would move on. The best way to pay a contractor is with certified funds. I hope this was useful!
Drawbacks: Paying cash is a hard thing to do on a big project, you have to have the money to do so. Paying cash may not afford you the same protections as paying with a credit card. Some credit cards offer insurance as a standard on things that are purchased using that card.
Concerned: I would not be too concerned about the type of payment requested by the contractor as long as a receipt is given and the warranty information is clearly spelled out. It is important to ensure that the contractor is Bonded and Insured to ensure a course of action is available to you should there be an issue. Cash is simply another form of payment.
As long as the paperwork is in good order, the payment method should not matter.
ALWAYS GET A RECEIPT
It is rare to pay in cash… However if the work is completed to your satisfaction and you receive an invoice for the completed work, I do not see a problem with it. But as I said before, it is rare. We’ve only had one customer pay with cash in recent years.
There are no drawbacks. They are probably offering you a discount and saving both parties money. They should sign contracts, and initial where payments are issued. The world accepts cash, checks, cards and now other methods. Pay anyway you want.
There is absolutely nothing to be concerned about with a cash request or cash discount. It is extremely common for businesses ranging in size from local shops all the way to the federal government to offer cash discounts. It is such a common business practice that I am surprised people are advising caution. Nearly every corporate account on NET30 terms or greater offers a cash discount.
There are several reasons for this: First and foremost checks sometimes bounce resulting in nonpayment. Credit card payments cost 3% or more to accept, and can be disputed or back charged at a later date, or the total charge can be held by the processing company for up to 6 months for many, many reasons. Most contractors are not willing (nor can they afford) to put in a day’s work to get paid 6 months later, or even worse not at all. Get a receipt, take your cash discount, and you’re in the clear.
Never pay in cash, as you will not have a record of the transaction.
Yes I would if he is asking for cash. Taxes can get you here and the contractor might be hiding from the IRS which is bad. Check his business tax license out online and always as a good rule have a paper trail even if cash payments are made. Have him sign something saying you gave him x amount in front of a notary to protect yourself.