Business Success

A Tradie’s Guide to Securing Payments from Clients

Written by Marie Julian | Sep 18, 2024 1:53:02 PM

(Image source: Deposit Photos)

As a tradie, securing payment from clients is crucial to running a successful business. Unfortunately, many tradies encounter issues when it comes to getting paid for their work. 

Did you know a recent story on our site featured a tradie who lost a whopping $75,000 due to a client not paying? Ouch! Luckily, there are steps you can take to secure your payments and avoid such a nightmare.

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1. Start with a Clear Contract

A well-drafted contract is the foundation of securing payments. Before any work begins, it’s vital to outline the terms and conditions of the job in a legally binding document. Include important details such as:

  • Scope of work
  • Total cost and payment schedule
  • Deposit requirements
  • Deadline for final payment
  • Any extra charges for variations or delays

Contracts protect both you and the client. By having everything in writing, you reduce the chances of disputes over payment. Clients are more likely to take your work seriously if there are clear terms in place from the start.

Make sure to have your client sign the contract before starting the work. You can take a leaf from the playbook of some savvy tradespeople who request signatures on an invoice before beginning, with a binding clause that ensures the client agrees to pay for the work. It’s a simple yet effective way to protect yourself.

(Image source: DepositPhotos)

2. Request Fair Deposits

Asking for a deposit upfront is a great way to secure partial payment before work begins. Deposits show a client’s commitment to the project and help cover initial costs for materials and labour. However, it’s essential to keep deposit requests reasonable.

According to Australian regulations, deposit amounts vary across states:

  • NSW: Up to 10% for most jobs
  • VIC: 10% if the project is under $20,000; 5% for jobs over $20,000
  • QLD: 5% deposit for projects over $20,000; 10% for work between $3,300 and $19,999
  • WA: Maximum of 6.5% for jobs over $7,500
  • SA: 10% deposit for larger projects, with a cap of 5% for contracts over $20,000

If you’re operating in other regions, it’s best to follow the general guideline of a 5-10% deposit, depending on the scope of the project. Always document the deposit in your contract and provide a receipt upon payment.

3. Communicate Payment Terms Clearly

One of the simplest ways to secure payments is through clear communication with your client from the outset. Don’t wait until the job is done to talk about money—establish payment expectations right away.

For instance, when providing a quote, especially for simple jobs, it’s best to write it up on the spot and give it to the client immediately. If the job is more complex, send a written quote within a day or two—any longer, and you risk losing the client. After sending the quote, always follow up with a phone call or SMS to check they received it, and ask if they have any questions.

On arrival at the job site, confirm the total price and ask, “How do you intend to pay today?” This sets the tone for payment being an expected part of the transaction. Be proactive about discussing payment options, such as cash, card, or bank transfer, so clients are prepared when the time comes to settle the bill.

4. Invoice Promptly and Follow Up

Once a job is completed, send your invoice as soon as possible. Delays in invoicing can result in delays in payment. Make sure your invoices are detailed, clear, and easy to understand. Include all necessary information such as:

  • Your business details
  • Client details
  • Description of the work completed
  • Amount due
  • Payment due date
  • Accepted payment methods

If payment is not received by the due date, don’t hesitate to send a polite follow-up. A simple reminder can go a long way in getting clients to pay. If you’re still not getting a response, consider a more formal approach with a second reminder or a phone call. Keeping payment communication consistent and professional shows clients that you take your business seriously.

5. Watch Out for Bounced Cheques

Even though cheques are less common nowadays, they are still used by some clients. Unfortunately, bounced cheques—those that cannot be processed due to insufficient funds—can leave you out of pocket. To protect yourself from this scenario:

  • Verify Funds: Ask your client to provide a cheque guarantee card (if available) or check with their bank to ensure they have sufficient funds before accepting a cheque.
  • Cash Cheques Promptly: The sooner you deposit the cheque, the faster you’ll know whether it will clear. Delaying deposit increases the risk of the client withdrawing funds from their account.
  • Include a Clause in Your Contract: Consider including a clause in your contract outlining penalties for bounced cheques. This could involve additional fees for the inconvenience or a policy requiring alternative payment methods if a cheque bounces.

In the event a cheque does bounce, follow up with the client immediately and request payment via a more secure method, such as bank transfer. Be polite but firm—sometimes clients will attempt to delay payment further if they believe you won’t pursue the matter seriously. A bounced cheque is a breach of contract, and you are entitled to payment.

(Image source: DepositPhotos)

6. Consider Payment on Delivery (POD) or COD

For smaller jobs, securing payments immediately upon completion—known as Payment on Delivery (POD) or Cash on Delivery (COD)—is an efficient way to ensure you’re paid before leaving the site. You can request that clients pay in cash or by card once the work is done. Additionally, you could verify a bank transfer has been completed before wrapping up.

This approach works particularly well for tradespeople who complete short, one-day projects. It eliminates the need to chase payments later and reduces the risk of delayed or missed payments.

7. Have a Payment Terminal for Secure Payments

In today’s fast-paced world, having a payment terminal is essential. Not accepting card payments because of the bank fees is a false economy. What you spend in bank charges, you will make up for avoided bad debts and improved cash flow. Payment terminals like those from Square or your bank allow clients to pay immediately once the job is done.

If you expect the client to pay in cash, make sure to notify them in advance so they can be prepared. After the job, don’t hesitate to ask for payment right away. For most trades, getting paid on-site eliminates potential delays and ensures your cash flow remains healthy.

(Image source: Unsplash)

8. Have a Payment Recovery Process in Place

Even with the best precautions, you may occasionally deal with clients who don’t pay on time. In these cases, it’s important to have a payment recovery process in place. Some common strategies include:

  • Send a final reminder: A final notice with a specific deadline for payment, mentioning the potential for legal action if ignored.
  • Negotiate a payment plan: In some cases, it may be better to offer a payment plan rather than waiting indefinitely for the full amount.
  • Legal action: If the client still refuses to pay, you may need to consult with a lawyer or a debt collection service.

While legal action should be your last resort, having a process in place ensures you’re ready to deal with non-paying clients effectively.

Using a platform like ours can help connect you with clients looking for professional tradespeople. However, as with any business arrangement, it’s important to remain cautious. 

To protect yourself from significant losses, you can:

  • Verify Client History: Before committing to larger jobs, check reviews and references. If a client is new to the platform, exercise extra caution.
  • Set Payment Milestones: For large projects, request progress payments at key milestones. This reduces the risk of not being paid for significant work completed.
  • Use Secure Payment Methods: Always prefer bank transfers or other secure forms of payment that ensure traceability and reduce the risk of bounced cheques or payment disputes.
  • Be Clear in Contracts: As mentioned earlier, having a clear contract with terms for payment deadlines and penalties for late payments is key.

While ServiceSeeking can bring in new clients, combining these tools with smart business practices will help you avoid the pitfalls some tradies have faced.