As a renovation company, we frequently get asked by potential clients:

Can we do a cash deal?

Our answer is always the same:

You can pay in cash if you wish, but the price and our integrity remain the same. We are an above-board company and don’t do work under the table.

We really don’t like working with clients who want us to do work 'under the table', and we really don’t think you should be willing to hire a company that is willing to do a cash deal either. Here’s why...

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What’s the benefit of a cash deal?

The contracting industry is notorious for cash deals. It comprises 27.8% of the underground economy.

Why do customers want to do cash deals? To save money! The belief is that if you pay in cash and your contractor therefore doesn’t have to claim the income, you will, at a minimum, save the 13% tax and potentially get a break on the price as well. Everyone wants to save money, and of course, contractors don’t want to pay the government more money than they have to. So what’s the big deal with cash deals, then?

It’s illegal

Plain and simple, it’s illegal to do business under the table and not report all of your income to the government. If a company is willing to do business with you under the table, does that mean that they are paying their employees in cash too and therefore not paying payroll taxes, CPP, etc. to the government? That may not seem like such a big deal, but what if that company is suddenly out of work and they have no jobs lined up for a few months? That means that their employees who are paid in cash can’t collect Employment Insurance, and they are simply out of a job until more work comes along or they find another job. Overall, this just encourages illegal and immoral business practices, and would you really want to do business with a company like that? If they are willing to defraud the government and have little concern for their employees’ futures, what other short cuts might they take on your project?

What about the warranty?

If you’re asking a company to do a cash deal, then there won’t be any paper trail or evidence that they ever did work for you. What guarantees do you have that they will come back for deficiencies after the job is complete? Good luck trying to connect with the company after the job is done. Remember, by agreeing to do a cash deal with you, this business has already identified itself as dishonest.

What type of quality workmanship will you be getting?

Typically, companies with integrity are also those that produce top-quality work. Consequently, they are also the companies that won’t do cash deals because they are busy enough doing honest work that they don’t have to accept dishonest work. By default, if the company you’re working with wants to do a cash deal, what type of quality will you be getting out of them?

Will the job actually get finished?

If your contractor is willing to take cash as payment and therefore needs to eliminate a paper trail, there will be no signed contract. Without a contract, there is no guarantee that they will even remain until the bitter end. We hear time and again about contractors who were doing cash deals with their customers, asked for another payment, and then never bothered to show up again. Customers were unable to reach them by phone or email.

When a contractor is willing to take cash deals, they are also often the type of contractor that will underprice the job. They will do this for two reasons: 1) to get more work and underbid the competition; and 2) because they are inexperienced and truly don’t know how to price work. The problem with both of these scenarios is that these same contractors will often abandon projects when they realize that they are losing money on the job.

Several times, we’ve been hired to come in after our clients have gone through the nightmare of dealing with a contractor who they did a cash deal with and then abandoned the job. In one instance, our clients in Whitby, Ontario, tried to contact the company for over a year. They even found out where his current jobs were and showed up on site, only to find out he had abandoned that job site too! They even got their lawyers involved, but after high lawyer fees started eating up their funds, they finally decided to just hire a reputable contractor to complete the work. That’s when we were brought into the project.

It can cost you a lot more in the long run

For our clients in Whitby, their experience with a cash deal ended up costing them a lot more in the long run, and not just because of the lawyer fees! There were so many deficiencies with the work that their first contractor did that we had to demolish some of the work and start over in order to ensure it was done right. There is a saying from Ben Franklin that rings so true:

The bitterness of poor quality remains long after the sweetness of low price is forgotten.

WSIB and liability insurance

Any good contractor will carry at least $2,000,000 in liability insurance and pay WSIB premiums for all of their employees. Another risk you take with cash-deal contractors is that they may not carry either! That means that if one of the workers gets hurt on the job site, you could end up getting sued. If your property or belongings are damaged as a result of their work, there’s no liability insurance to cover the damage. And you can guess that the next step will be that the contractor doesn’t bother to show up on site the next day either!

Permits and code requirements

When it’s a cash job with no paper trail, required permits won’t be taken out. Your project may require a Building Permit or an electrical permit, and your cash-deal contractor won’t likely take one out as it will create evidence of the job. Consequently, there won’t be an inspector to ensure your job has met all code requirements.

One job we were brought into after the cash contractor disappeared had a load-bearing wall that was to be removed. Demolition had already started on the wall, as the contractor didn’t believe it to be structural. An architect had never been consulted, drawings were never done, and there were no plans to install a beam for support. Our clients were mortified to find out that their house could have had severe structural damage. We submitted the drawings from our architect to the city and had full inspections done for the structure as well as an Electrical Safety Authority permit taken out for the electrical work. Our clients can now sleep well at night knowing the job was done properly.

If you were considering doing a cash deal for an upcoming project, I hope that this post gave you a different perspective on the money you might save. There are so many factors to consider when selecting the contractor you should work with. To learn more, please read my post on How to Select a Reputable Contractor.