Not getting Paid in your Electrical Business?
Not getting paid in your electrical business?
Customers who consistently pay late, or those who do not pay you at all, can cripple the cash flow of your electrical business. Not only that, they can also negatively affect how you pay your employees and suppliers, which may damage your reputation as an employer and customer and could even result in you being chased for late payments yourself! Going down the route of an expensive court case takes a lot of time, energy, and money, but there are easy ways to tackle the problem of not getting paid in your electrical business, and I will outline a few simple processes and solutions in this blog.
Make it easy for your customers to pay you
This sounds very simple and straight forward, and to be honest, it is! In today’s technological world, customers probably pay all their bills either via electronic payment or via a debit/credit card. However, if you only accept cash or cheque payments in your electrical business, you are making it difficult for your customers to pay you by putting the responsibility on them to find time to go to the bank to withdraw cash. Add details of how to pay electronically by bank transfer to all your invoices. Even better, get a payment app where customers can pay you at the time you complete the job using a card or by Apple or Google Pay.
Be very clear and set out your payment terms right from the start, especially when working with new clients, so they know whether they have to pay on completion, or 30 days from the date of the invoice, etc. Your invoices should also detail your policy for late payment including fees and interest charges. Sometimes, this is enough to ensure you are paid on time. You could also add an incentive to make sure customers pay your invoice immediately, such as an early payment discount or a discounted rate on future jobs.
Of course, knowing your target customers will help to make sure you only attract those who pay on time, reducing the likelihood of non-payment.
Deposits
Of course, not all jobs are equal. Some are more complicated than others and require the purchase of expensive parts, so it is good to think about having a policy in place for this type of job. You could set a limit, above which you will require a deposit. For example, all jobs over £500, or £1,000. Knowing your predicted weekly/monthly cashflow will help you to decide on a realistic limit for your electrical business. This is especially useful if you are just starting out, when securing a deposit will help you with ongoing job costs. Asking for an upfront deposit has many advantages:
• Gives you a level of confidence when doing the first job for a new customer
• Helps you to sort out genuine customers from timewasters (you can read my blog with tips on how to avoid time wasters here.)
• Provides some financial protection against not getting paid in your electrical business
• Gives you confidence that the customer will not go somewhere else
• Helps towards buying materials and overheads
Once again, remember to be clear from the beginning, so include the deposit amount in your quote. You could also use the fact that you require a deposit to reassure the customer that once paid, their job is automatically booked into your schedule. This will give them the peace of mind that you will turn up when you say you will.
Staged payments
If you are splitting a job over a number of days or looking at a first and second stage fixes, then you may want to consider putting staged payments in place to cover each completed phase or service. This kind of payment schedule is especially useful if you deal with a lot of builders or project managers, or if the majority of your work is industrial or commercial. In addition, you could also get your work signed off at each stage by the site foreman, project manager, or plant manager. This will give you written evidence that you have completed each stage to the required standard, leaving no grounds for complaint for uncompleted work, or work not finished to the time agreed.
The key thing with staged payments is to make sure that the details are included in your terms and conditions, the contract, and the quote, so the customer is clear about how much you expect them to pay (or what percentage of the total), and more crucially, when they should pay it. There is a common misconception that if a company sets their payment terms at 90 days, that is when your invoice, as a contractor to them, will be paid. However, if your payment terms are 30 days, and this was clearly set out in your quote/contract/terms & conditions, they have accepted your payment terms by giving you the job and should, therefore, pay accordingly.
Its just worth noting here that in legal terms, which ever party provides their terms and conditions last has the upper hand. So, even if you have included your terms in all the right documents, but the company you’re doing the work for then issues you a Purchase Order with their T&Cs on it, theirs are legally in force, not yours as these were the last T&C’s issued.
Use automated systems to help you
Using automated accounting systems like Xero and ServiceM8 can help you to keep on top of invoice payments and avoid not getting paid in your electrical business. Automated systems can easily turn quotes into invoices at the click of a button, so all the relevant job information is already included. You can make sure invoices detail the procedure for payment – how much and by when – and insert your bank details so customers can pay electronically or via a link to systems such as PayPal or Stripe.
Some automated systems may also give you the ability to set up different payment terms for individual customers and the option to add automatic reminders for those who have not paid on time. Remember that your customers lead busy lives too, and sometimes they genuinely forget to pay you – they are not withholding money maliciously. Therefore, sending them a reminder will probably prompt them to pay your invoice immediately.
Getting paid late or not getting paid in your electrical business can impact your business, time, confidence, cash flow, employees, and suppliers, but putting a few simple procedures in place will ensure you are paid on time and in full. Completing everything set out in your quote to the standard required and within the stated time frame means customers have no grounds for withholding payment.
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