Five ways to get paid during silly season

Collecting money from clients over the summer holiday period is not an uncommon problem for builders because many people switch off from paying their bills over that time

I know builders who dread coming back from summer holiday, because it often means huge bills and an empty bank account. How many times have you had to organise a loan just to get you through January?

Below are four simple steps you can take to ensure you don’t get caught short on your own holidays.

1. Protect your client

Business owners the world over find it hard to talk to clients about paying overdue accounts. It comes from feeling indebted to them and it’s understandable. Yet most builders I know want to be able to pay their bills on time! They don’t want a bad credit record, nor the reputation that goes with it.

Most people don’t want to damage their own credit rating either, so rather than fearing your clients, help them protect their excellent credit rating by expecting them to pay on time; if they don’t, they may lose their rating.

This assumes you have clear payment terms and conditions included in your signed agreements, outlining the steps that will be taken should accounts not be paid. If you don’t, take steps now to put these in place for the future.

2. Send reminders

Include the agreed payment date on the invoice and send a polite email on the due date to remind them. If it’s not paid, then follow up in a couple of days with another reminder. Tell them that, if there is a problem, they should contact you immediately.

If you are using an online financial package (eg, Xero) you may be able to utilise an add-on application that tracks invoices, sends reminders and even follows up defaults (eg, Debtor Daddy).

This may not get a really stubborn payer to act, but it will ensure that your invoices stay at the top of the pile.

“If you’re working on a job where variations are a possibility (eg, a renovation) and your client is going on holiday, make sure you gain their prior approval for a variation process that enables work to continue

3. Bill accurately

More than 50% of invoices rejected the first time are turned down because they’re not accurate. Not only are inaccuracies time wasters, they give your client the impression you can’t be trusted with finances. As a result, your client may feel compelled to go through and double check all of your invoices in case of mistakes.

Protect yourself from delays by making sure your invoices are accurate, clear and easy to read, and double-check them before hitting send. Don’t try to get something (eg, an unauthorised variation) past your client by hoping they won’t see it.

It’s better to discuss any questionable items with them first, so there is no room for disagreement. Overall, the goal is to remove all possible reasons for ‘justifiable’ delays and get paid on time, every time.

4.   Stay current

During the holiday period, when there may be limited access to clients and you or your builders identify the need for a variation, there is a huge temptation to go ahead without authorisation. However, doing so may result in a disputed invoice and a delayed payment. This is not good at the best of times, but certainly not good when cash flow is stretched during the holiday period.

If you’re working on a job where variations are a possibility (eg, a renovation) and your client is going on holiday, make sure you gain their prior approval for a variation process that enables work to continue. It may be that you gain written permission to make variations up to a certain value, or that you agree to document the problem with photos etc, and email them your solution, with their agreeing to reply within a certain time frame. Or you may agree to appoint a proxy.

Take care to only do work you’re sure you will be paid for.

Getting your clients to pay their accounts on time over the holiday season starts with you. Get your financial processes in place and operating smoothly during the year, so that, in the holiday season, it’s simply business as usual with only a few minor modifications.

 

 

About The Successful Builder

Graeme Owen, based in Auckland, is a builders’ business coach. Since 2006, he has helped builders get off the tools, make decent money, and free up time for family, fishing, and enjoying sports. Get his free ebook: 3 Reasons Builders Lose Money and How to Fix Them for High Profits at http://TheSuccessfulBuilder.com.