Cash Flow Tips For Trades

1. Payment Terms

Most trades will charge for a combination of labour and materials. It is important you strike a balance with the customer as to what payment terms are in place. Leave it so that payment falls due after the work has been completed and you run the risk of not getting paid. Ask for payment upfront and customers might look elsewhere as they run the risk the work will not got done or will be unsatisfactory. A balance needs to be struck. Perhaps use staged payments.

Construction contracts might need you to consider the specific legislation that applies, including The Scheme for Construction Contracts (England and Wales) Regulations 1998.

2. Do Your Homework On Your Customers

If you are carrying out work for an individual, check the insolvency register to see whether he has any insolvency issues.

The insolvency register lists any bankruptcy orders or individual voluntary arrangements. If the potential customer is on this list, tread very carefully about giving credit as they are unlikely to have the money to pay. It is difficult to pursue a bankrupt through the courts.

If your customer is a business or company, also search Companies House and the London Gazette to see if there are any worrying notices.

3. Plan Ahead For Tax

Make sure you plan ahead for tax payments.

Trying to find the money when VAT payments or tax on profits falls due, can be cause an instant cash flow problem if you haven’t set money aside to pay. Don’t get caught out as HMRC can be very aggressive in pursuing money due.