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Carillion and getting paid by your customers

This article was first publised in Quest Forces resettlement magazine, shortly after the collapse of Carillion. The impact that the failure of Carillion will have on small businesses cannot be imagined, unless you have a small business and pray that customers pay on time. Having a business is hard and there are many traps. This is just about the biggest of all.

Carillion, and learning to get paid on time.

This article is for anyone thinking about self-employment and going it alone. January saw the collapse of the second largest construction firm in the UK. Carillon, the giant that’s been feeding smaller suppliers for years, has finally run out of money.


Whilst this is bad news for its 20,000 UK employees, (who knows how many are ex-forces?) spare a thought for the many thousands of small businesses that are now in big trouble. A few years ago, one of our customers went bankrupt and we lost that money, and it hurts.

Why are these smaller companies in trouble?

Survival in business does not just depend on making a profit, this will not pay the bills. Getting paid on time, after completing the work is essential.  Unfortunately, when you start out in business, no-one tells you how to make this happen.

Statements, invoices, terms of business and credit accounts are all things you need to know about in the business world. These are important because they set the rules for being paid. It won’t be natural to you, because every you get paid and you never need to ask for it. However, things are different when you’re self-employed. Hopefully this article will help you avoid learning the hard way.

Customers don’t want to pay you

Customers do not want to give you money. They’ll happily ask you to come along,  buy the parts and spend your time doing the work. However, when it comes to paying the bill, let’s face it we’d all rather not have to. It’s unlikely Mr and Mrs Average will string you along and trick you into doing work for nothing.  It’s more likely they’ll get into financial difficulty after they’ve committed to getting the work done. So maybe you’ll fit a kitchen, or install a central heating system for them. Then there’s the awkward moment when you want your money and they want to hold on to it, or, they simply don’t have it.

Or, if they’re a business, there might be situation a situation out of their control.  Anyone in the supply chain underneath Carillion won’t have the payments they expected. I expect that once the news broke about Carillion, the whole payment system collapsed all the way down the chain. So if you’re at the end of the chain, getting paid is unlikely.  The important thing is for you to control the conversation about getting paid.

So, the first thing you must do, before starting any work, is agree the ‘Terms of business’. I was guilty in the early days of just presuming they would pay me immediately. With my retail customers, who’d lost their car keys, this wasn’t an issue as I had the keys and they needed them, so they happily pay. However, with a business such as a garage or a manufacturing company, often they wouldn’t expect to pay immediately. They would just assume they had thirty or sixty days credit and assumed they could send a cheque in the post. I didn’t know any better and so let it happen.

You control when you get paid

When you get the call to quote anyone for a paid job, part of the quote is to agree how long they will take to pay you. I have good customers that always take up to sixty days to pay me. That’s ok now, because I know them, we have a relationship and they always do pay on time. However, when you start out with a new customer, you must agree when that cheque will come. This should be stated clearly on the invoice you give them. An invoice is a document that clearly states what work you have done. It must show the rate you have charged them, and when the payment is due. Put it in bold, using black or red ink, and point it out the due date when you hand them the bill. After all it’s your money that you’ve earnt.

If your customer is a retail Mr or Mrs, they should pay you immediately. If you’re fitting a kitchen, you should ask for a deposit. Outlaying five thousand pounds in parts and then fitting them into a house will expose you to risk and you cannot assume these nice people will pay you. Sorry if this sounds untrusting and cynical, but there are so many stories of brick walls built, gardens landscaped with no money forthcoming, so treat them the same as Asda or Tesco treat you. They won’t let you take your shopping home and then wait for money in sixty days, so there’s no reason you should.

How to get paid by Business Customers

If you’ve done work for a business and you’ve agreed when you’ll get paid, in thirty or sixty days, you’ll need to send a statement to the customer. This was my downfall as I didn’t appreciate how important this is.

A statement is just the same as the one you get from your credit card company, listing each transaction, when it was made and when it is due. Many companies, especially those in the motor trade, will not pay you without a monthly statement showing clearly when the payment is due.  Imagine you’re the person in the accounts department and your job is to pay your suppliers. It’s simple if a customer like me, sends you a statement at the start of the month, with copies of all the invoices attached. This way you have every piece of information at hand. However, if you do a job, and leave a paper copy of the bill with someone at the factory, the chances of the accounts department seeing it are small. It will get lost, and you’ll not get paid.

So, take control of invoices and statements. Then, when you’ve sent the statement, call the company accounts department, and get a good relationship with the person who is going to pay you. Introduce yourself, explain that you’re counting on the money and agree on a date that you’ll get it. Remember that the person paying you is just like you. They have a family, they have money concerns and understand how important getting paid is. If you talk to them and tell them you need the money, otherwise the kids will starve, you’ll stick in their heads and hopefully the cheque or BACs payment will arrive on time.

Warning signs from Carillion

It can be tricky to judge people. Often the most well-dressed customers come into our shop, driving the latest model car and don’t want to give us even a deposit before we order a second key for them. Other times, the scruffiest, owners of the scruffiest cars surprise us when they take out a big pile of cash and pay us in full, in advance!

However, it’s important to look out for warning signs that a customer isn’t going to pay you. In the case of Carillion, just a few months ago they sent a letter out to all the people that they owed money to. They told them that instead of paying at sixty days, they were going to pay at ninety. With a small business, it may be that you can’t get hold of the accounts department, or they only work two days a week. The worst signs are when they claim that there is an error on your invoice or statement and you need to resubmit paperwork. This is usually a delaying tactic and you shouldn’t settle for it.

What you need to do when a business doesn’t pay you

If this happens to you, and a customer keeps fobbing you off, you need to limit your losses. You must put them on ‘stop’. This is when you no longer complete further work for them until they pay their bill or part of the bill. It feels unnatural and awkward. As well as this, the work they are giving you may be good profitable work. However, as we said at the start of this, profit will not pay your business and household bills. The only thing that does, is cash in the bank, getting paid by your customers.

The most effective thing is to visit them in person. It’s very hard to withhold money from someone once you meet them, especially when you build a relationship. Take control of the situation, just like you’ve done in the forces. Getting paid is all about your survival as a business.  Fifty percent of businesses fail in their first year, and owe money to their suppliers.  Use the skills you’ve learnt in the forces to be polite but firm and to take control.

Tips on getting paid on time

  1. Agree on a date before you start that you will get paid.
  2. Consider a card machine. Most people have access to a credit card.
  3. Be systematic in chasing your money, it’s the most important part of the business.
  4. Don’t make it personal. Even the nicest people will owe you money, don’t let them off the hook.
  5. You’ve new skills to learn and a whole new language to understand but once you know it, business -life is so much easier. Most people are good deep down and problems getting paid are a mixture of reasons. But it’s really down to you. Good luck.

Teenage Business

So, my daughter is twenty this week. It’s unbelievable that somehow, she has turned from an utterly dependant baby, into a London undergraduate, living away and making her own decisions. This made me realise that I now have a teenage business, and it’s having growing pains. Let me explain.

Teenage Business

One of the reasons I left the RAF was the kids. My daughter was six and my son just two when I left the safety of regular money and relative security. Fourteen years on and it’s made me realise that the business has changed from a demanding toddler, into a teenage business that is finding out just who it is.

My Teenage Business

This week, I’ve been pulled in a number of directions, from both old and new customers. Some are my oldest and most loyal, those that have given me work from the very early days. These expect and deserve a certain respect and they are a priority to me. Balance this with newer customers, that are promising exciting opportunities, and I’ve needed to make a few tough decisions.  Who do we make a priority? What rate we charge for our services for these new customers?  This teenage business is finding it’s way, and there’s been some growing pains!



Funding a business, the wrong way..

Can I just get this out of the way. I was an idiot when it came to getting the money to start my business. Obviously I didn’t feel like I was at the time, but within a few months I knew, as the great Jim Rohn would say, I knew I had ‘messed up’. Funding a business is hard for a reason.

For a start, I had no experience in how to fund what I wanted to do. That’s a good reason to get it all wrong, but not really an excuse to how much of an idiot I was.  I’d been to Business Link, and did the lesson in writing a business plan and funding a business. I’d even taken it to the bank. My business manager, to be, read it through and asked me some really awkward questions, (you know the type ).

funding a business

Firstly, what money was I planning to put into the business? How much money did I have to tie myself over until I started to make a profit…(awkward) When was I going to start to make a profit?

These are not questions you want to hear when you are so excited about the idea that’s burning inside your head. Do you remember that time when all you could think about was going it alone? I still remember it well. So these questions threatened to put a bit of a dampner on things. For a start, I didn’t have any money sare that I could use in funding a business. Next, I didn’t have any money saved for cash burn and as for profit and loss, I was going to be a Locksmith, not an accountant.

I was such an idiot. The business manager, must have seen me coming, with my Business Link folder and my standard business plan. ‘NO, I’m sorry. You need to go away, and come back with a better plan. You’ll need money to live on and it will run out very quickly if you’re not making a profit….’

Now I have a problem. I had already decided to leave the RAF and told them such. The plan inside my head was amazing. No-one in my city was doing what I wanted to do, so surely, how could it fail? On top of that, I was going to be paid by the RAF for 18 months, while I worked my notice so what could go wrong? Why wouldnt they lend the money I needed for funding a business?

Mistake number One. Listen to someone with experience.

Up to this point I could be forgiven. I was just one of many dreamers that had woken up one day, wanting to make a go of being in charge of my own fate. The point where this changed was ignoring the advice of my business manager ( what did she know ) and also not discussing it with anyone else that may question me. So I did what any of us would do and applied for three credit cards, with a total limit of £20,000 and got all three granted (but didn’t mention this to anyone). This was my land for funding a business.  Then, instead of arranging sensible finance for my £20,000 equipment I needed, I put it all on the cards, maxed them all out. I’m actually cringing now as I think about it. If you are thinking about this, don’t be an idiot.

Mistake number two. Understand what you sign up for

Not understanding minimum payments. The cards had 9 months interest free. Unfortunately, I didn’t even think about how much the minimum payments would be. This was partly because I didn’t have a cashflow forecast and partly because I was far too busy doing important stuff like….a logo….and business cards! ( I told you I was an idiot).

funding a business

Maxed out

The biggest shock was when the credit card statements started to arrive. The payments were many hundreds, that I didn’t have. I honestly thought I would have nine months before I needed to pay anything! I’m so embarrased, but I need to get this out and in the open. Now I considerd myself to be smart. I did an engineering apprenticeship, was selected for RAF Aircrew and was promoted in the shortest possible time, so how did I have such an idiot brain?

Mistake number three. Live like you are skint.

Despite my stupidity, I had the best possible chance to make up for it. With 18 months pay, while I set up my customer base and gained experience, all I had to do was watch what I spend and save some of the money…..I didn’t. We carried on living like I was in the RAF, on nearly £40K, which twelve years ago, was good money. I wish I had known, but I  just carried on regardless. With three months to go, I was barely covering my business costs!

funding a business

How did I survive? Well we did, with two tiny children and little income from the business.  This will take another blog entry, but for anyone thinking about leaving a perfectly good job and starting out alone STOP!

Honestly answer the following questions.

How much can you expect to earn once fully experienced in the business you are planning? So if you are going into plumbing, how much does a plumber earn? Find out. Talk to experienced plumbers, do not believe what they tell you on the Armed Forces resettlement adverts, or any course for that matter. Do the research. Email plumbers and ask them, look at job adverts.

How long will it be until you are earning that amount of money? It takes a long time to get up to speed. As a Locksmith, it took me at least five years. How are you going to make up the shortfall in cash? If you can’t answer this, then it will end up as debt of some sort and debt is what will sink your business before it even gets going. Believe me, I know.

Lastly. Why are you starting a business? Have you just had enough of where you are working? Is it that you can’t face another job interview? Maybe you’re seeing the business you work for charge your time out at £50 per hour and you’re only getting paid £10 (There’s a good reason for this). Whatever your reason, make sure you’re honest with yourself. I knew that I was interested in self-employment because I was running a part-time business years before in the RAF and loved it. However my main motivation was not having to do interviews that I would get rejected from. I put my family at a real risk of homelessness, just because I couldn’t answer these few questions, oh, and because I was an idiot, funding a business.


Adrift, in a rough business ocean

I’ve started to sort my emails. There are about 10,000 of them and so this is not a simple task. However, most of them will be deleted. Fortunately, I have a few years worth of emails from my self to my coach, all those years ago. It was a time I was going through a hard time and felt adrift in a rough business ocean.

It was a time that I lacked any confidence that I’d ever get out of my financial mess (more of that later). Needless to say, I was up to my neck in it and regretted ever leaving the RAF.

This is a short piece that I wrote, back in 2011. It’s pretty desperate.

A rough business ocean

‘Imagine, if you can,  you’re in a large sailing boat, its been your home now longer than you can remember. It’s your own design and you built it.

The proudest, most exciting time was when your family and friends watched you launch it, “good  luck, you’re so brave, I never knew you were a boat builder!” it was a dream come true, master of your own destiny.
So you made your way out of the harbour, the water was calm and you had endless energy to check the stores, paint the deck and you looked forward to getting some distance from the shore.

“we’re just going to see what happens ” Is the reply you give when people ask “ where were you going?”

 You’d not really known thought about this. 
“How long was the voyage? “
Again, this hadn’t seemed important all those months and years ago. 

Gradually, you did make your way further. You were so heads down working away that after a while you realised. You  were in open water.
The swell grew and lately you notice that the boat rocks and rolls and you fear it’s going to tip over if the next wave is any bigger. 
But there’s something more worrying.  Water is seeping through the wooden joins of the boat. There had alway been a little water at the end of the day, but lately its worse, you are spending more and more time balling out the water. How could it be that you found yourself so adrift in this rough business ocean?
 You thought that it was easy to build a boat, you read a few books, followed some of the advice, but there was alot to read and in the end you just wanted to get going. So now you’re miles from the shore, you’re all alone, even if you knew where to steer the boat, you couldn’t because you’d spend all day baling.
 Without the time to be a helmsman, the boat simply drifts, from one storm to the next. There are things in the boat that would help, but you don’t have the skills to use them, or the time to learn. If you could just turn back the time, you would have done it all so differently.’
Being out of control, is what a rough business ocean feels like. There doesn’t feel like theres any hope, or help around. Its a common feeling and one you need to be prepared for, then hopefully you’ll never feel it.


My latest project.

I love starting projects. The initial buzz of an idea will keep me going for hours, maybe days. I’ll daydream about whether it would work, how it could make money, or make a difference to people in some way. I remember when starting a business was my latest project. It’s the longest one I’ve ever kept at.

I’ve always been like it. When I started my apprenticeship, I was working towards joining the RAF, my next project. When I eventually got in the RAF, I dreamt about getting to fly and when I eventually graduated to the squadron, I started a part-time business installing satellite dishes (more on that another time). Always thinking about the next project.

My current business has been the longest project I’ve stuck at and it hasn’t come naturally. I lost the excitement factor even before I’d left the RAF (this should have been a warning sign). Then the responsibility of making it work filled me with dread every day back in the early years. Now I know what I’m doing, it’s routine, yet rewarding.

Where will this project lead?

However, the real beauty of this project is not the money I make from it now, but the potential to do other interesting things with it. This week, I had an interview with BBC Radio about van security, last week I broke the news about a brand-new problem on Volkswagen keys that may affect millions of users. Next week my new website is released with its in-built learning centre. These are all mini projects that allow me to be open, to any new opportunity.

I’m pleased I started this project fifteen years ago. It’s given me this amazing opportunity, that keeps my head spinning. To quote ‘Red’ from my favourite film, The Shawshank Redemption.

Red: [narrating] ‘I find I’m so excited, I can barely sit still or hold a thought in my head. I think it’s the excitement only a free man can feel, a free man at the start of a long journey whose conclusion is uncertain…’