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Tips for tradespeople: How to get paid

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Tradespeople running small and medium sized businesses are coming under increasing financial pressure due to poor payment practices in the industry.

With employees, suppliers and tax to pay, maintaining a decent cash-flow is essential.  While those who are employed can say with a level of certainty what and when they will be paid, small business owners and sole traders do not have the same guarantees.

According to the Federation of Small Businesses, 50,000 small firms go under each year because of late-paying clients.  However, far from being just a business issue, poor payment practice has wide reaching implications, contributing to stress and poor mental health of building services industry workers.

How does poor payment practice affect tradespeople?

A recent survey of 600 business owners working across the HVAC and building services sector revealed the human cost of late and unfair payment practices:

  • 80% had suffered stress due to late payments
  • 40% had experienced panic attacks or anxiety
  • In the case of 40% of respondents, financial stress had caused relationships issues
  • 5% of respondents claimed their relationships had irretrievably broken down due to payment pressures
  • 36% had experienced insomnia linked to poor payment practices
  • 10% had suffered with suicidal thoughts and 4 respondents had attempted suicide.

As a result of these worrying findings and impactful events, such as the collapse of Carillion in 2018, industry bodies including BESA and the Electrical Contractors’ Association (ECA) are campaigning for government to introduce legislation on payment reform.

How can tradespeople get paid on time?

With the most expensive time of the year approaching, here are our top tips on getting paid:

  1. Know your worth! Building services installers and engineers are skilled workers providing a specialised service. Remember it’s not just your time on site, there are lots of extra costs involved in running a business and these should all be accounted for in your invoice.
  2. Prioritise invoicing. Keep a track of payment dates, especially for larger projects where payments are staged, and invoice promptly.
  3. Clear terms from the start. Specify payment terms and any extra payments from day one.  Be clear about whether amounts quoted are fixed or estimated.
  4. Have a strategy in place for late payments. Have a draft letter ready to go and a set system or when and how you will chase for late payment.
  5. Get an app. There are lots of apps available to help you manage your business admin, set reminders and get paid.  Many allow you to take card payments from your smartphone, which will be particularly helpful for domestic installers.  Keeping a close eye on the financial side of your business is always good practice and apps and software can help here.
  6. Know where to get further advice. If you need advice, you can find out about the next steps from the gov.uk website.

The Samaritans in the UK can be contacted for free, 24 hours a day, on 116 123

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