30 days payment terms...
Discussion
Bit of advice,
Ive started sub contracting for a firm and doing a fair bit of business.
Probably around 10-20k a week, and we have a balance now sitting at close to 80k on 30 day terms, which Im not due till end of month.
10-20k is a lot of money to us never mind the 80k. Ive agreed to 30 terms. Its potentially a very lucrative gig for us which could go on for a few years. There is no formal signed contract, but there are purchase orders (albeit very slow) and various emails back and forth with scope and confirmation of works.
However, I don't know what it is, but there is always an element of doubt in my head despite the research and homework I've done all coming back good.
By the time the first invoice due we could be at balance of close to 150k.
Its a massive opportunity and not one I could say no too. Calculated risk, but Im getting a bit nervous. Non payment or even a few weeks late payment could put us in real trouble.
They made x2 payments early as a gesture of "good faith" but only of 15k in total.... Im still uneasy.
How do I limit my exposure on this ? Can I implement a maximum trading limit ? Trying to approach this without rocking the boat.......
PH experts, please advise.
Ive started sub contracting for a firm and doing a fair bit of business.
Probably around 10-20k a week, and we have a balance now sitting at close to 80k on 30 day terms, which Im not due till end of month.
10-20k is a lot of money to us never mind the 80k. Ive agreed to 30 terms. Its potentially a very lucrative gig for us which could go on for a few years. There is no formal signed contract, but there are purchase orders (albeit very slow) and various emails back and forth with scope and confirmation of works.
However, I don't know what it is, but there is always an element of doubt in my head despite the research and homework I've done all coming back good.
By the time the first invoice due we could be at balance of close to 150k.
Its a massive opportunity and not one I could say no too. Calculated risk, but Im getting a bit nervous. Non payment or even a few weeks late payment could put us in real trouble.
They made x2 payments early as a gesture of "good faith" but only of 15k in total.... Im still uneasy.
How do I limit my exposure on this ? Can I implement a maximum trading limit ? Trying to approach this without rocking the boat.......
PH experts, please advise.
Factoring, may help with cash flow.
You could even just do it in the short term until you get enough money sat in the bank to be comfortable.
And most factoring companies will do the chasing of debt for you should it end up that way.
But make sure you read all the terms as you are still liable for the money if the debtor doesn't ultimately pay.
You could even just do it in the short term until you get enough money sat in the bank to be comfortable.
And most factoring companies will do the chasing of debt for you should it end up that way.
But make sure you read all the terms as you are still liable for the money if the debtor doesn't ultimately pay.
mikebradford said:
Factoring, may help with cash flow.
You could even just do it in the short term until you get enough money sat in the bank to be comfortable.
And most factoring companies will do the chasing of debt for you should it end up that way.
But make sure you read all the terms as you are still liable for the money if the debtor doesn't ultimately pay.
Thanks Mike, You could even just do it in the short term until you get enough money sat in the bank to be comfortable.
And most factoring companies will do the chasing of debt for you should it end up that way.
But make sure you read all the terms as you are still liable for the money if the debtor doesn't ultimately pay.
I'm trying to avoid that at all costs but could be an option.
I know the contractor is being paid fortnightly on these projects so they should be wiling to pay easy.
before the "credit crunch" as it was named I used to offer 30 day terms on all my contract jobs. We regularly got builders stretching that to 60 days and in some cases 90 days.I was extremely lucky that when the collapse happened that I wasnt owed a HUGE sum of money as we were just at the end of a contract.
In reality once you have started the work they have you.
I know of one contractor who had a nervous breakdown due to large sums being outstanding and the stress it caused him - he went from putting a deposit on a new Aston to driving a transit ...in a very short space of time.
About a year later work picked up again and a couple of clients tried stretching the 30 day terms, it happened on a few contracts, they were warned over 12 months but repeatedly on holiday abroad and unable to be contacted and then I just refused to price any further contracts for them. They were paying only when they had the deposits for the next contract and needed work to start...
I am not here to subsidise someone elses business or lifestyle...
just take care is all the advice I can give - also consider whatever the overdraft or credit facilities are actually costing you against the profit you are making on these contracts.
In reality once you have started the work they have you.
I know of one contractor who had a nervous breakdown due to large sums being outstanding and the stress it caused him - he went from putting a deposit on a new Aston to driving a transit ...in a very short space of time.
About a year later work picked up again and a couple of clients tried stretching the 30 day terms, it happened on a few contracts, they were warned over 12 months but repeatedly on holiday abroad and unable to be contacted and then I just refused to price any further contracts for them. They were paying only when they had the deposits for the next contract and needed work to start...
I am not here to subsidise someone elses business or lifestyle...
just take care is all the advice I can give - also consider whatever the overdraft or credit facilities are actually costing you against the profit you are making on these contracts.
Last year I let myself get wrapped up in doing business with a well known company and the promise of big numbers. I skipped the normal "written in stone" style contract and the normal due diligence because of who they were and it cost me 100k
You really need to think about what will happen to the business if they call up on Monday morning and say they are out the game. If the numbers don't add up then stop and rethink it. If the company value your work and want to work with you they will be happy to put something in place to limit your risk. As you mentioned they have the cash in the bank so working on a 14 day term should be something that can be discussed.
Also try and have a word with other subs and find out if they are on the same terms or if they have shifted the goalposts when the work level has built up. If they know a lot your resources relay on their contract then it puts them in the perfect position to renegotiation an even better deal for themselves.
You really need to think about what will happen to the business if they call up on Monday morning and say they are out the game. If the numbers don't add up then stop and rethink it. If the company value your work and want to work with you they will be happy to put something in place to limit your risk. As you mentioned they have the cash in the bank so working on a 14 day term should be something that can be discussed.
Also try and have a word with other subs and find out if they are on the same terms or if they have shifted the goalposts when the work level has built up. If they know a lot your resources relay on their contract then it puts them in the perfect position to renegotiation an even better deal for themselves.
Jamster123 said:
Bit of advice,
Ive started sub contracting for a firm and doing a fair bit of business.
Probably around 10-20k a week, and we have a balance now sitting at close to 80k on 30 day terms, which Im not due till end of month.
10-20k is a lot of money to us never mind the 80k. Ive agreed to 30 terms. Its potentially a very lucrative gig for us which could go on for a few years. There is no formal signed contract, but there are purchase orders (albeit very slow) and various emails back and forth with scope and confirmation of works.
However, I don't know what it is, but there is always an element of doubt in my head despite the research and homework I've done all coming back good.
By the time the first invoice due we could be at balance of close to 150k.
Its a massive opportunity and not one I could say no too. Calculated risk, but Im getting a bit nervous. Non payment or even a few weeks late payment could put us in real trouble.
They made x2 payments early as a gesture of "good faith" but only of 15k in total.... Im still uneasy.
How do I limit my exposure on this ? Can I implement a maximum trading limit ? Trying to approach this without rocking the boat.......
PH experts, please advise.
Offer them a % discount on the invoice for paying 14 days instead of 30. Probably some way to recoup that "loss" if you're creative with the pricing of your services/product, too. Win win.Ive started sub contracting for a firm and doing a fair bit of business.
Probably around 10-20k a week, and we have a balance now sitting at close to 80k on 30 day terms, which Im not due till end of month.
10-20k is a lot of money to us never mind the 80k. Ive agreed to 30 terms. Its potentially a very lucrative gig for us which could go on for a few years. There is no formal signed contract, but there are purchase orders (albeit very slow) and various emails back and forth with scope and confirmation of works.
However, I don't know what it is, but there is always an element of doubt in my head despite the research and homework I've done all coming back good.
By the time the first invoice due we could be at balance of close to 150k.
Its a massive opportunity and not one I could say no too. Calculated risk, but Im getting a bit nervous. Non payment or even a few weeks late payment could put us in real trouble.
They made x2 payments early as a gesture of "good faith" but only of 15k in total.... Im still uneasy.
How do I limit my exposure on this ? Can I implement a maximum trading limit ? Trying to approach this without rocking the boat.......
PH experts, please advise.
Potential to get a call after 60 days when they owe 150k saying sorry we can't pay is not a risk I'd be willing to take regardless of how great a customer they seem to be right now.
Speak to them, air your concerns, discuss options.
I've just got out of the contracting game largely for this reason.
Always busy busting our guts doing loads of work, racking up high materials and labour costs every week, especially in the summer holidays.
The only people making any real money are the main contractors who think they own you and do everything they can not to pay or to smash you down on price. Some are better than others, our main client has it's annoyances but they are good at paying.
We've been working for a large company installing their systems for them (they just turn up and commission) and they just hang you out to dry. Beat you up on price, argue over valuations and extras then don't pay! We refused a job at last minute but they needed us so promised better terms if we went on their payment plan with a large bank, we could draw down the money as soon as the valuation was signed off for losing a few %... so we went on that, did £50k worth of work on one particular site and low and behold none of the applications are signed off and it's been 40+ days. The interest rate was twice what they told us too.
We were always owed 100-200k + every month and struggling to pay the on-going bills despite "making loads of money". And we're in the same game as you Jamster. If you're working for a large home builder then just watch yourself!! They use smaller companies and then just move onto the next one when they go bust or don't meet their low prices. Similar story to all the big FM companies and the big main contractors.
Anyway, not a problem I face any longer, the company continues, but without me!! I do feel your pain and without a large buffer of money, it's not an easy one to resolve.
One thing I will say!! DON'T PUT ALL YOUR EGGS IN ONE BASKET. Maximum trading limit is probably your best route, if they refuse to co-operate then they aren't worth dealing with as they'll easily put an end to your company. Just make sure they know the terms in advance, don't make them feel like they're being held to ransom when the next job comes along.
Earning big money is great, but only if a. your business survives to receive and b. there is some left over for you before moving onto the next one.
Always busy busting our guts doing loads of work, racking up high materials and labour costs every week, especially in the summer holidays.
The only people making any real money are the main contractors who think they own you and do everything they can not to pay or to smash you down on price. Some are better than others, our main client has it's annoyances but they are good at paying.
We've been working for a large company installing their systems for them (they just turn up and commission) and they just hang you out to dry. Beat you up on price, argue over valuations and extras then don't pay! We refused a job at last minute but they needed us so promised better terms if we went on their payment plan with a large bank, we could draw down the money as soon as the valuation was signed off for losing a few %... so we went on that, did £50k worth of work on one particular site and low and behold none of the applications are signed off and it's been 40+ days. The interest rate was twice what they told us too.
We were always owed 100-200k + every month and struggling to pay the on-going bills despite "making loads of money". And we're in the same game as you Jamster. If you're working for a large home builder then just watch yourself!! They use smaller companies and then just move onto the next one when they go bust or don't meet their low prices. Similar story to all the big FM companies and the big main contractors.
Anyway, not a problem I face any longer, the company continues, but without me!! I do feel your pain and without a large buffer of money, it's not an easy one to resolve.
One thing I will say!! DON'T PUT ALL YOUR EGGS IN ONE BASKET. Maximum trading limit is probably your best route, if they refuse to co-operate then they aren't worth dealing with as they'll easily put an end to your company. Just make sure they know the terms in advance, don't make them feel like they're being held to ransom when the next job comes along.
Earning big money is great, but only if a. your business survives to receive and b. there is some left over for you before moving onto the next one.
Edited by MrSparks on Sunday 4th September 19:35
All that jazz said:
Offer them a % discount on the invoice for paying 14 days instead of 30. Probably some way to recoup that "loss" if you're creative with the pricing of your services/product, too. Win win.
Unfortunately most of them don't care about saving a few percent because either: a. they're using your money to fund their investments/pay packets/cars (extremely annoying)
b. they don't have much spare cash so they're using your cash to cashflow their business and other jobs (extremely dangerous for your business)
The only way I'll get back into contracting is if my bills and living costs are covered by another income and I have a decent pool of start up money.
Edited by MrSparks on Sunday 4th September 19:36
Can you ask about and see how other people see the main contractor regarding paying? Try other contractors or wholesalers and see if the money comes through on time.
If everyone else gets paid on time you should be fine. If others are having trouble getting what they are owed then I would be careful about how much work I did.
If everyone else gets paid on time you should be fine. If others are having trouble getting what they are owed then I would be careful about how much work I did.
MrSparks said:
good stuff
When I started out as s/e I was contracting to various agencies who then subbied me out to their clients. It worked, but I was after more money and wanted to remove the middle-man (the agency) in order for me to get what their clients were paying them. I managed to do that easily enough through having a good reputation with their clients but being relatively wet behind the ears still when it came to business stuff I grossly underestimated the hassles I was soon to face with regards getting paid for the work done, despite having clear T&Cs on payment.I have always eventually got the money I've been owed, although had to resort to a rather uncouth method with one company who were royally taking the piss which involved me walking in to their office and taking one of their laptops (which some poor member of staff was working on at the time!) in lieu of payment. This was as a direct result of being laughed at down the phone by some kid in their accounts department who told me that I wouldn't be getting my money and nor would I carry out my threat to drive over to them and take equipment in lieu of payment, then promptly put the phone down. Unfortunately for me I wasn't banking on the MD being built like a brick outhouse and sat in the same room where I'd just stormed in and walked out with a laptop under my arm
. I very nearly got the living s
t beaten out of me in the corridor outside 
but after things had cooled down and he'd heard my side of the story (which he wasn't even aware of), he apologised and the outstanding amount was transferred to my account right away.This and other experiences where companies have dragged 30 day payment terms out to piss-taking levels made me realise that contracting directly to agencies is not so bad after all as the vast majority will pay a week in hand. In fact the current one I'm contracting to get the invoice for the previous week on the Monday morning and the money is in my account usually 2 days later on the Wednesday. The agency margin is typically £1-1.50/hr and I'm happy to sacrifice that in exchange for being paid within 7 days. I look at it as a prompt payment fee!
Jamster123 said:
There is no formal signed contract, but there are purchase orders (albeit very slow) and various emails back and forth with scope and confirmation of works.
Honestly get a full formal written contract ASAP without it they could bend you over at any point. In terms of factoring without a contract or agreed PO's you'll find no bank/credit house willing offer terms. Moreover if your contracts include an element of variation or extension to scope then you will not be able to factor these unless payment is agreed.
At the moment are you paid based on invoices or applications?
I assume this is something construction related in terms business do you have a policy on dayworks? and if not why not?
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