Getting paid every time and on time

Payment terms

Generally, if you are working in the domestic market payment is requested when the job you’ve been asked to do is complete. You would not normally extend credit terms to your customers. I recommend that you include a small paragraph in your written quotations, estimations or confirmation letters covering the following payment terms:

• Method of payment. Are you going to accept cash only? Or cash and cheques? You don’t have to accept cheques. My opinion is that you should accept cheques, but the choice is yours. If you are not going to accept cheques then you must inform your client of this prior to starting any work. Failure to do this will only lead to problems when you present your invoice.
• Timing of payment. Normally payment is due after the job is finished and your customer satisfied that everything he is being asked to pay for is completed.

Late payers

There can be a number of reasons why your customer will be unable to settle your account on the day you finish the job, the most common one being that they aren’t physically present. In such circumstances I have simply put my invoice through their letterbox when I’ve finished and have received a cheque in the post a few days later. This system has worked very well. However, what do you do if your customer either fails to pay, or tells you they won’t pay?

               Your initial approach when dealing with late payment should be:

• 1.Make sure that your client has received your invoice. The best way to do this is by way of a polite telephone call. No need to be aggressive or threatening. In fact, there will never be a need for you to be either of these things.
• 2.As soon as you’ve established that your client is in receipt of your invoice then you should ask them for payment.
• 3.If your client tells you that they will not be paying your invoice then obviously you’ll need to know why. Perhaps they feel that you have not completed the initial job they asked you to do. Or they are not satisfied with your work. Obviously if this is the case you should return to their property and put right what needs to be put right. You can’t charge someone for unfinished or below standard work (although there are many who do). If your client still refuses to pay follow the steps outlined later in this chapter: Dealing with a payment dispute.
• 4.Assuming there is no dispute and if after your telephone call you have still not received payment, you should write to your client requesting they settle your account immediately. Make sure your letter is polite and enclose a copy of your invoice.
• 5.If payment is still not forthcoming you should write your client a final reminder letter. In this letter you advise your client that payment is now overdue and that unless your account is settled in full you will have no alternative but to take legal action to recover your debt.

If after this your account remains unpaid you have two options available to you:

• Instruct a debt recovery firm to write to your client requesting payment.
• Take them to court yourself.

Debt recovery firms

On payment of a small fee you can instruct a debt recovery firm to recover the debt on your behalf. Provided that your client is not disputing your invoice, then a letter from one of these companies should be all that is needed to have your client settle your account. This is by far the easiest and most straightforward method of recovering a debt. If your client is still refusing to pay, then the firm you have employed will inform you of this and offer to recover the debt for you via the County Court. You will have to pay additional fees for this. It’s at this point that you will have to decide whether or not it is worth chasing the debt, in terms of both time and money.

Taking your own legal action

Suing your client by issuing a County Court Summons is not particularly difficult, however you should first consider carefully:

• Have you the time available to complete paperwork and attend court hearings?
• If the dispute has arisen as a result of an allegation of poor workmanship, or you failing to do what you said you would, then your client will be given an opportunity to tell the court why he is not willing to settle your account. If the court rules in their favour, not only will you lose your legal fees but you could well up end paying your client’s legal bill as well not being paid for the original job. Make sure that you have a concrete case before taking anyone to court.
• Is your invoice large enough to warrant this action? You will have to pay the court an initial fee to begin your action. If after the court serves a summons on your behalf and your client still refuses to pay, then you will have to pay further costs to arrange a court hearing.

Going ahead with your action

If you believe that you have a solid case and that the amount owed merits this action then suing your client is relatively straightforward:

• Find out the name and address of the County Court closest to where you live. You’ll find them listed in the phone book under courts.
• Either phone up, or visit them to pick up an information pack together with the forms you will need to complete in order to begin your action.
• Complete the forms as per the court’s instructions and enclose your payment. The court will then serve a summons on your client by first class post.
• Your client then has 14 days to reply to this summons.
• If your client fails to do anything you then ask the court for a judgement to be made immediately.
• If your client pays you then you simply inform the court that your action has been settled and that is the end of the matter.
• If your client acknowledges receipt of the summons and lodges a defence, then the court will send a copy of the defence to you. Both you and your customer must now complete questionnaires supplied by the court and return them to the court.
• Your claim will then be given a hearing date and you will be provided with directions from the court on what you must to do to prepare your case. It is at this point that you may have to pay additional costs.
• Finally, you will have to attend a hearing or trial.

Dealing with a payment dispute

Hopefully such instances will never arise. Certainly you can do a number of things to avoid disputes happening in the first place.

• Prior to starting any work you should always send a written quote, estimate or confirmation detailing what work you are proposing to carry out and at what price.
• Communicate with your client. If there is a problem with the job then let them know as soon as you do. Don’t put in extra hours overcoming some obstacle that has arisen and then present your client with an inflated bill. If you’re going to have to veer off your initial price then let your client know before carrying out the work.

If your client disputes your final bill then try to discuss the matter with them before threatening any legal action or demanding payment. Remember, if you do take your client to court for non-payment of your invoice, the court has a duty to listen to both sides. Just because you have initiated the action does not mean the court will necessarily rule in your favour.

If you find yourself deadlocked in a dispute then ask your client to put their complaint in writing. If they won’t, then you should write to them as soon as possible outlining in your letter the steps you have taken to resolve their complaints. In the event of a court action you will need written evidence. Recollections of telephone discussions and meetings will most certainly be disputed. So make sure you confirm and clarify everything in writing.

Staffing issues

Hiring additional help

There will be times in your business that you will need to hire some additional help either to help you with a specific job or to work with your during the busiest seasons. There are two ways to do this:

• use associates
• hire staff.

Associates

By far the easiest way of coping with additional work is for you to use associates.

• These are people who will work with you on a self-employed basis and at the end of the job, day or hour will provide you with an invoice for their labour at agreed rates. You then pay them and record the expenditure in your account book.
• They are responsible for paying their own tax and National Insurance.
• Even though they are self-employed, you must still have adequate Employers’ Liability Insurance to cover them as they will be working under your direction.

I have a network of associates I use in my business. It’s an ideal way of having staff whenever you need them, without having to employ anyone full-time. I strongly recommend you consider using associates, at least to begin with.

Hiring staff

The most important thing to consider when deciding on hiring staff is making sure that you have enough work for them. Even one part-time staff member is an extra mouth for your business to feed. You also bring additional, and some would say onerous, responsibilities to your business:

• You will have to pay them whether or not you have the money available. It may happen that your wage bill will fall due before your clients have paid you. This may mean taking on an unnecessarily costly short-term bank overdraft facility.
• You are responsible for their health and safety and this means making sure that your employees are adequately trained to work in your business, which might mean additional training costs.

Your duties and responsibilities

Employment legislation is a complex subject and I recommend that if you are proposing to take on staff, other than using associates or sub-contractors, you undertake further research before doing so.

                Your responsibilities will include that you must:

• Not discriminate when employing anyone on the grounds of sex, marital status, disability, race or sexual orientation.
• Give your employee a written contract of employment within two months of starting.
• Tell your local tax office that you have taken on an employee.
• Deduct income tax and National Insurance from your employee’s wages and pay this to the government.
• Pay where and when due, statutory sick pay and maternity pay.
• Provide your employee with statutory holiday leave – four weeks a year and pro-rata for part-time employees.
• Still be responsible for paying for your employee if you cannot work owing to bad weather.
• Ensure the health and safety of your employee whilst in your employment.
• Have a duty of care to all your employees.
• Pay the minimum wage and provide a payslip detailing pay and deductions.
• Give minimum notice periods as required by law if making someone redundant and pay redundancy money.

Taking on employees is a big step and one that you should consider carefully.

Where to get help

The Inland Revenue publish an invaluable New Employer Starter Pack, which can be obtained free of charge by telephoning their helpline on 0845 60 70 143 or visiting their website at www.inlandrevenue.gov.uk and click on Employers. You can also contact their helpline for advice on the same number.

Summary

• Bookkeeping is an important part of your work. Accurate, up-to-the-minute books are vital for future business planning and looking at ways of improving performance.
• You are legally required to keep a record of all your business expenditure and income.
• Make sure that you choose the correct trading identity to begin with.
• When submitting your quotes and estimates, make sure you include a paragraph covering your payment terms, for example: Payment in full is due on completion of the work and can be made by either cash or cheque.
• Deciding to employ staff is one of the biggest business decisions you’re likely to make. Be careful in the early days that you don’t expand too quickly. Far better for you to be so busy that you are turning work away rather than struggling to find work and having to pay staff for doing nothing.
• As an employer you have certain legal duties and responsibilities for your staff. Make sure you’re fully familiar with them and that anyone you do employ has a written contract of employment.