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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.
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