How to Get Paid for Tradies

How to Get Paid for Tradies

Running a trade business is a full time job. Especially if you are a sole trader or still on the tools, staying on top of the business side of things is a challenge. While most of the customers you encounter will be honest and prepared to pay for your services, some will be unable or unwilling to settle their debts to you. Negotiating with your debtors and trying to track down the money you’re owed can be both time consuming and frustrating. Especially when you have already completed the project, recovering your money can seem like an impossible task.

Rather than waiting for the worst to happen, we have a few tips to help you manage your cash flow and minimise the risk to your business from non-paying clients.

1. Request a Deposit or Down Payment

Depending on the nature of the work, it’s common for tradies to spend days, weeks or even months completing a project. When you’re investing a large amount of time, effort and materials into the work, it’s a good idea to ask for a deposit or down payment up front.

Requesting a deposit or down payment helps by:

  • Increasing your cash flow while the work is ongoing
  • Providing cash that can be used elsewhere in the business
  • Minimising the impact if the client refuses to pay the rest of their debt
  • Decreasing the final invoice to avoid non-payment due to bill shock

For large jobs, consider asking for payments in gradual instalments throughout the process, rather than invoicing in one or two stages.

2. Stay on Top of Your Accounts

Managing the accounts side of your trade business probably isn’t your favourite task. But, effective account management is the best way to encourage your clients to pay their bills on time.

The key to account management is clear and prompt communication. Set your expectations at the project outset, laying out the terms of deposits, progress payments or payment plans you’ll be using. Wherever possible, it’s also a good idea to provide written estimates of the work for your clients’ approval. Once the work is completed, issue invoices immediately and regularly follow up on them to make sure they’re paid on time. If you’re struggling to stay on top of your accounts then you should consider investing in a program like Xero or MYOB that can automatically issue invoices and payment reminders on your behalf.

3. Keep Your Pricing Competitive

Bill shock can be a major contributor to clients being unwilling or unable to pay their debts. For the most part, bill shock can be avoided by ensuring your pricing remains competitive. Not only does this mean the work keeps rolling in, but it’s your best defence against clients claiming that the final bill is too high for them to pay. If you review your pricing and find that you’re charging a little too much, try negotiating with your suppliers to reduce the cost of materials rather than simply decreasing your own income.

4. Work With a Debt Collector

It’s an unfortunate fact of business that sooner or later you will encounter a client who can’t or won’t pay their bill. Following up with clients, developing payment plans and chasing the money you are owed is both time consuming and stressful.

For that reason, tradies should consider cultivating a relationship with a local debt collection agency they trust. Debt collectors can work to recover any money you are owed, protecting your relationships with clients and working towards the best outcome for everyone involved. When researching debt collectors, be sure to look for their qualifications, fees, success rates and select an agency that aligns with your collection goals and ethics.

5. Hire a Bookkeeper

When you begin dealing with more customers and taking on more work, it’s time to outsource certain parts of your business. If your strength lies with the hands-on aspects of trade work, hiring a bookkeeper is a great next step towards growing your business. Using a bookkeeper means you’ll always have someone staying on top of invoices and client payments. That frees up your time to do the things you’re best at, and you can leave the nitty gritty details of your finances to a professional.

A certified bookkeeper will probably also have some good ideas on how you can improve your cashflow to further reduce the chance of being left holding bad debt.

Need to Get Your Clients Paying? Talk to Dynamic Commercial Collections

Even if you do everything else correctly, sooner or later you’ll encounter a client that can’t pay you. Whether they’re experiencing their own cash flow problems or are simply being stubborn, recovering the money you are owed can be a challenge. Maintaining a relationship with a commercial debt collection agency company like Dynamic Commercial Collections is the best way to ensure you always have an avenue to pursue your money. Our skip tracing debt collection and debt consulting services team understands the importance of maintaining your relationships with clients. We work to the highest ethical standards to recover any debts you are owed without impacting your working relationships. Our qualified field services and debt collection legal advice team helps both individuals and businesses throughout Brisbane. Contact us today for more information or to book a debt collection services consultation.

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