There is so much information out there about how small businesses can get more work. You can blog, Instagram, Facebook and Twitter and the emphasis is on getting more sales because that’s how you grow your business; that’s how you make the money.
But what if I told you that lots of sales and lots of work are a hiding to nowhere, unless you get paid for the work you do?
It is so often in the "busyness" of getting work done that the normal risk-management processes slip, contracts aren’t read or signed, variations are carried out without anything in writing, and debtors aren’t chased until it is too late. Yes, it is all that unexciting stuff that really helps your business grow.
As a subbie lawyer, all too often I have seen subcontractors pay for the materials and the labour for the work, but not get paid for the work. That isn’t working for free, that is actually paying to work so someone else can have the benefit on their balance sheet. Now that is truly unsexy!
This burning your cashflow at both ends is what cripples so many young thriving trade and subcontractor businesses.
If you want to make the work that you carry out actually count on your balance sheet, you need to get paid for it. There are just some jobs that will cost you rather than reward you and all the real protections start before you enter the contract.
The purpose of this article is to give you four ways to protect yourself:
1. Don’t wait not to get paid
So frequently subbies tell me that they don’t want to enforce payments because they don’t want to upset the payer and they may miss out on potential future work. If you don’t get paid it’s not a good job and if it’s not a good job why would you want to work for that payer again?
There are so many protections for subcontractors, such as security of payment and subcontractors' charges, but you need to act quickly to meet the time frames. Otherwise, you miss out and once you miss out on the time frames for security of payment and subcontractors' charges, enforcing your debt just got 10 times harder, 10 times more expensive and will take 10 times longer.
So be on the front foot!
2. Put everything in writing
By writing I mean more than sending text messages. So often work is done and not paid for because the subbie was in so much of a rush to get the work done, rather than write down the variation request and get it approved before the work was carried out.
If you don’t get approval, then decide not to do the work. Again, it is better to lose the variation work, than carry out the work and never be paid for it.
3. Don’t put your eggs in one basket
I know it’s an old saying but in business it makes a lot of sense. So often young subbies get enticed by big commercial jobs that are 50-100% of their earnings.
The risk if you do not get paid on your entire business is enormous. By spreading your risk across a number of jobs, the risk and the impact of not getting paid on one job is going to have a far less devastating impact on your business.
4. Read your contract
We understand that reading contracts is probably not enjoyable for you. In fact most people would probably rather trim their nails with a grinder. But if you want to protect your business and your profit you actually need to know what you are agreeing to.
If it all goes pear shaped, the first place everyone will look is the contract.
If the contract is complicated (and most are confusing), you can have a construction lawyer review the contract. Yes, contract reviews by lawyers will cost money especially if the contract is long and complicated, but you can ask for:
Only certain clauses to be reviewed; and
For the lawyer to colour code the clauses so you know which ones are the most important to negotiate.
When thinking about the legal costs of a contract review, think about how much it will cost you if you don’t get paid and what the legal fees will cost then. I can guarantee that if you ever get into a payment dispute it will be a time that you can least afford legal fees and that the fees will cost vastly more than the cost of a contract review.
At Aitchison Reid, we understand the importance of getting paid for you, your business and your family. If you want an expert law practice focussed on subcontractors and trade contractors that understands the industry, your perspective and how to get paid, call us today on 07 3128 0120 or email us at subcontractors@arbuildinglaw.com.au.
Author: Fionna C Aitchison Reid
