Wise Up Wednesday – Another £100 million Lost! So Let’s Review The Basics About Getting Paid – Part One
“Subcontractors fear bad debts owed to the supply chain following the collapse of a major main contractor could top £100m” is one of just many daunting headlines over recent months!
That’s a massive sum that is going to hit home hard for many Specialist contractors. Yet I’m still seeing some Specialist Contractors concentrating on getting the job done rather than getting paid!
Your business will fail if you don’t collect what you are owed in sufficient time to meet your liabilities.
So, if you want to keep the bank off your back, collect your money when it is due.
What Are The Basics Of Getting Paid?
How well you get paid will depend upon many factors, including the nature of your business, the type of clients or contractors you work for, the conditions of contract under which you have contracted, your management systems and, in no small part, upon the skill and expertise of your people. And make no mistake, the skill and expertise of your people at a number of different levels is absolutely vital to success, not just those chasing the payments.
The principles of collecting your money when it is due are more easily tackled when the various parts are broken down and considered separately.
Choose Who You Work For
Yes, that’s right, getting paid properly starts with deciding who you will or won’t work for.
That might come as a revelation to you, but if you go off and work for any Tom, Dick or Harry without giving their financial status or payment record a second thought, then good luck to you. You will need it!
I appreciate that your decision might be influenced by your workload at the time, and I appreciate that it’s much easier to be selective in times of plenty. But, what’s the point of spending your money on doing a job that you’re not going to get paid for?
Getting an order is one thing, but what you really need to know is whether that client or contractor will be ready, willing, and able to pay when the money falls due. A customer who can’t, or won’t, pay is worse than no customer at all, and a customer who takes too long to pay, makes unreasonable reductions, or sets off money unfairly, is just as bad.
As many insolvency examples have proved recently, you cannot rely solely on the apparent size of the customer or contractor. Not all large companies pay their debts on time and some national contractors are the worst payers of all.
So how can you make worthwhile credit enquiries about an organisation?
As a minimum, check them out on Top Service or other credit reference agency, but make sure you look at their trading history not just their credit score. And make as detailed an enquiry as possible from other Specialist Contractors who have worked for this organisation. Here are a few things to ask:
- What’s the culture of the organisation
- Are they helpful or unhelpful to their sub-contractors in respect of payment
- How easy it is to agree interim applications, variations etc.
- Are they prone to making reductions or set-offs
- Most important of all, ask whether or not they always pay on time.
Don’t be shy about making these enquiries or that making these enquiries might cause offence to potential customers. In well run, objective, organisations nothing should be further from the truth and reputable companies will respect your professionalism.
Part Two of this post will be in your ‘Wise up Wednesday’ email on Wednesday 20th August. If you would like to register to receive a copy and have not done so already, please email info@streetwisesubbie.com with your details.
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