Where's the money?

How could you do something so vicious? It was easy my dear, you forget I spent two years as a building contractor — Vincent Lugwig's response to Jayne in the hit film The Naked Gun highlights what is a challenging industry to operate within.

Getting paid for your work is rarely a laughing matter. The recent scenes of a contractor using an excavator to smash up the reception of a hotel he'd been working on, in revenge for non-payment, shows how frustrating it can be. Some clients are experts in nonpayment and know precisely how the law works. However, before you take a sledgehammer to recently completed installation read on.

1.Do your research

Improving your chances of getting paid on time, start well before you even think about stepping on site.

It's great to get the opportunity to quote on a new project, but take a little time to understand where and why the enquiry originated.

Have you been offered business which your competitor usually wins? Are they in a dispute over a past project, or has the client just not paid the bills meaning they need to find another source of credit - i.e. you.

Customers will often research you before getting in touch, so you should be looking to do the same in reverse. If the client is a limited company, then you can access the latest accounts for free at Companies House. Find out who the main directors are and investigate the financial health of the business.

Do a quick google news search to see if any bad news shows up. If a project is already on site, ask the other trades if the client is good at paying bills on time. If you are a sub-contractor to the main contractor, then check the financial health of the end customer.

2.Get your quote right

Produce a clear itemised quote which clearly explains the work you will be undertaking. Detail what you have included as part of the quote, and perhaps more important what isn't. List any assumptions which may not be evident during an initial site visit. If you are quoting from a set of plans, make sure you include the reference numbers and dates in your quote.

Don't bury the assumptions in small print or deep in a separate set of terms and conditions. Being open with the assumptions is a way to stand out against competitors and highlight some other options to the client. Learn from your mistakes and keep adding to the boilerplate list when quoting.

Example-

Rewire living room.

1 x 32A ring main with 8 x double sockets positioned 400 mm from the floor.

We have assumed

- Standard white plastic sockets mounted on 25mm deep back boxes.

- The client will remove all furniture and carpets before we start work.

- We can complete the work in a single site visit.

3. Get approval

Before starting work get the client to give written acceptance of your quotation.

Most larger projects will have some degree of changes between the quotation stage and what is actually on site. Seek written approval of any changes or additions and clarify the associated costs.

4.Payment terms

For a small project will you expect payment on completion? If so, it might be a good idea to invest in a low-cost payment terminal so that you can take a card payment on completion.

For more substantial projects detail the payment terms and be careful of the wording.

A bad example

-50% on completion of the first fix wiring.

-40% on completion of the second fix wiring.

-10% once installation is tested and commissioned.

Why is this bad? What if you can't complete the first fix because of something beyond your control. Such as a room not being finished on time or the client changing the specification.

So add a clause -

We reserve the right to invoice on a pro-rata basis if the project is delayed for reasons beyond our immediate control.

5.Invoice on time

If you are working as a subcontractor make sure you know the cutoff dates for issuing invoices to the main contractor. Often invoices dates are a few days before the end of the month, to allow the main contractor to submit their invoice to the client. Missing the cut off date could mean waiting another 30 days to be paid.

Include all the payment options and details in the invoice — nothing worse than not getting paid because the client didn't have the bank details.

6.Chase payment

Have a robust process in place to chase invoices and stick to it. Start chasing as soon as you submit your invoice, just a quick call to check the invoice has been received, and everything is as expected. If the client raises any problems, you need to deal with them as soon as possible.

If you are due payment at the end of the month make a phone call a few days before to check that the payment is scheduled. If a client has a desk full of invoices to pay and you are making the most noise you have a better chance of being paid than those who wait patiently.

If you don't get paid on time, then email the client straight away and ask for the reason and confirmation of when you will get paid.

Keep a record of all calls, emails and letters you might need these if things turn sour.

7.Excuses, Excuses

Sadly some clients are professionals when it comes to late payments. Some of the biggest companies hide behind anonymity and make you jump through hoops to get paid. Unfortunately, you only learn the tricks when you start chasing for payment.

Excuses can all sound very convincing. We didn't receive the invoice; you didn't include the purchase order number on your invoice, the address on the invoice is wrong, and even the finance director has broken his leg and won't be back until next month.

Some companies have a policy to only pay invoices when they receive a letter before court action.

8.Court action

Unfortunately, sometimes you will have no option but to take things further and take court action. You must be able to show that you have tried to settle the claim before taking court action - if you can't you may be penalised by the court.

The easiest way to do this is to send a letter before action, which states that you intend to take the matter to court and giving the person a reasonable amount of time to reply (usually seven days). Sending this letter is often enough to trigger a payment.

If not then you can file a claim online, and it's a relatively straight forward process. If the amount is less than £10,000 the case will usually go through the small claims process.