Get paid upfront
Limited Company contracting is fantastic in many ways – you’re your own boss, you can choose when you work and for how long, and have total freedom to design your professional career as you see fit. But like any great opportunity, there are still some downsides…
Not being paid on time is one of the unpleasant sides of contracting that almost everyone has experienced. Whilst it is considered the ‘nature of the beast’ by many contractors, there are some things you can do to avoid it. In this blog we show you the top five ways to prevent late payments.
1. Know how much you’re going to get paid
Seasoned contractors will know this point well, but if you’re just starting out then this is a valuable tip to adopt.
Never accept a contract that is yet to set out how much you’ll get paid – either as a day rate or total amount for the completed project in a set time frame. Whilst this may seem blatantly obvious, many contractors accept roles without scoping this out first, which can then lead onto either not being paid what they expected, or at all.
By doing so you’re showing the client that you understand their timescale, their expectations within that time period and how much they’re willing to pay for your professional time and skills.
2. Exude your professional presence
As a contractor it’s down to you to find your next contract. But remember that whilst you’re busy trawling job sites, speaking to previous clients and contacts, or liaising with other contractors, your potential clients are looking you up online.
Ensure your professional profiles (such as your LinkedIn profile or personal website) are up to date and display your experience and testimonials from completed contracts. If you look the part and mean business, you’ll be less likely to get messed around.
3. Charge deposits or milestone payments
A travel agent wouldn’t fly you out to a destination, let you stay in a hotel, then fly you home before taking payment – so why should contracting be any different?
Consider making an agreement with the client whereby a deposit is paid upon signing the contract, or lump sums of the final amount are paid in increments over the duration of the contract. That way you’re guaranteed payment for the work completed thus far and the client has faith that you will complete the job in full.
4. Haggle (but not by too much!)
Firstly, get a feel for how much clients are willing to pay for your skill set, experience and type of contract required to complete. Then, add 10-15% onto this amount.
When speaking to a potential client about your costs, pitch to them first with your inflated price and offer them a reduced price off your original cost. That way you’re showing the client that you’re willing to negotiate and you are considerate of their costs and budget restrictions, when in reality you are achieving your desired day rate without compromising.
This discount can also be applied to tip number three, whereby if your client agrees to a deposit or milestone payment, you could offer a discount to sweeten the deal.
5. Don’t ask – don’t get
Being upfront about payment and setting out parameters when it comes to guaranteeing payment can sometimes be tough, especially when you feel as though you’re telling the client you don’t trust them to pay you!
But remember it’s your livelihood you’re protecting, so don’t be afraid to speak up. Many contractors create written agreements with terms of engagement for their client to sign, which can remove the need to verbally discuss any potentially uncomfortable topics, so find what’s right for you.
Payment protection is key to a successful career in contracting
By setting out your own upfront payment strategies you’re protecting yourself against those clients who, for whatever reason, don’t pay you correctly or on time.
Why not try these five top tips when you win your next contract? You’ll never regret taking charge of your professional finances and will only gain confidence in becoming the contractor you want to be.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.