Cash vs Contracts: Saving $ Can Cost $$$!!
2 weeks ago, I got a call from a young woman asking me how much we would charge to replace some stairs. I figured this was your normal over-the-phone request for a price and explained that our policy was that we have to see the project in order to provide a price for any work.
But before I could finish my sentence, the young woman interrupted me, “My mom hired someone and I am worried he’s over-charging her and will take her money and run.”
This was not the conversation I was expecting to have when I answered my phone. I quickly changed course and asked a follow up question:
“Do you have a contract or are you paying cash?”
They were paying cash. They had given a portion of the cost to pay for materials upfront and the “contractor” was already asking for more money after just starting the project.
My advice was to not pay any more money and get something in writing before you proceed. If the “contractor” refuses, fire him and move on to someone who will provide you with a signed written contract.
Why you shouldn’t pay cash
Paying cash is a way for people to save money on renovations but it can cost piece of mind, as it did in this case. The client saves the sales tax, the contractor saves the income tax and the government is none the wiser. In theory, it’s a win-win.
But paying cash means there can be no paper trail for the taxman to find. So, there are no receipts, no contract and no warranty which translates to no accountability. With no warranty, you can only hope the person you are hiring will stand by their work because you can’t trust in a contract to protect you.
For example, let’s say you have your bathroom renovated and you are paying cash. With no receipts, contract or paperwork, it’s as if you went away to work one day and when you came home your bathroom had been magically renovated.
Now, let’s take it one step further. When you come home from work a week later, your magic bathroom has leaked into your kitchen ruining your ceiling, cabinets and floors. With no receipts or contract or warranty you have no one to hold accountable for the damages from your magic bathroom because there’s no paperwork to prove anyone was there.
You have to trust that whoever magically renovated your bathroom will stand by their work, do the right thing and repair the bathroom and all the damages it caused to your ceiling, kitchen cabinets and floors. If not, your money is about to pull a disappearing act because you paid in cash.
Why you should have a contract
The business definition of a written contract is a voluntary, deliberate, and legally binding signed agreement between two or more competent parties.
We use contracts because it provides a better experience for us and our clients. A contract builds trust with our clients and helps us provide better service to them by outlining the expectations for the renovation project ahead.
A contract will clarify all responsibilities and helps limit any possible disputes by having all aspects written and agreed upon before a renovation starts. This protects both the contractor and the client from any malicious intent on negligence on the other parties behalf.
A good contract should include but not be limited to:
Scope of work of the project
What is and is not included
Material specifications
Permit drawings if necessary
Overall cost
Payment schedule
Anticipated start date
Warranty details
Insurance information
A process for making changes during the project
Dispute resolution process
Trust is something that is built and not given. Having a contract is the first building block to establishing a trusting relationship with our clients.
Parting shots
Paying cash will be around until cash no longer physically exists. It’s important to understand by paying in cash for your kitchen or bathroom project you can save money in the short run but it will cost you piece of mind, and possibly a lot more, in the long run without the protection of a contract.
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