New Kitchen Business - will you get paid ??

BrentMaster

Hi,

This is in my opinion not a legal question but a new business related issue but feel free to move.

My mate is 28 and works in IT for the past 8 years. Before that he did built kitchens with his father for at least 4/5 years. He is now thinking of quitting the IT industry and start up his own business to sell and install kitchens.

He said he spoke to two of his Irish neighbours who had their own businesses (alarm company and driveway paving) and they told him to watch out as some people do not want to pay after new installations. Their businesses went "bust" and in their own words they said: "The Irish are not very prompt on payment".

The question is how can my mate make sure that he gets paid and also in time (not 6 months later) ?

Can he draw up some kind of contract when selling a kitchen to a client to say: "We both agree on terms and conditions" and state that full payment must be made, etc. and both parties sign it?

Does other carpenters experience the same issue and how do you deal with it? Any other answers/opinions are welcomed and thanks in advance.

(BTW he is foreign )

Slinky>

Your correct the best thing he can possibly do is draw up a contract, this explains to the customer exactly how much they will have to pay and exactly how much they will get, If drawn up correctly and signed by the customer can also be very helpful in worst case scenario of ending up in court,

He could aslo ask for a deposit before for he starts work? eg. 30%? and the rest due on completion.

Often customers wont pay becuase there is disputes about one part of the job or another, 'Some' tradesmen wont draw up a contract as the job is being completed for 'cash' so they dont want any paper trail ,

BrentMaster

Thanks Slinky,

You made valid points.

He said he is not sure if he can charge a deposit if he is starting the business from scratch, i.e. no references in Ireland yet? He plans to charge no deposit but to make sure the client signs a contract that full payment must be made upon completion.

He has many references from his home country, but do not think too many people will bother checking that?

kluivert

Alot of people are charging a interest rate on balances older than sat 30 days, this has been approved at EU and there is guidelines on the interest rate to use as well.

In addition to this, should this fail, then on the back of the invoice it would also state that balances older than 60 days are referred to a debt collecting agency.

If there is a dispute above the work carried out take it to the small claims court under the provisions of the "Sale of goods and Supply of services", Act 1980. If the work undertaken meets and satisfies the criteria set out in this Act then the judge should favour the plantiff.

Blackjack

Your mate could make an arrangement with a finance company, offering finance options on the kitchens.
This is if he's not just installing, but selling the units also, as the cost would be enough to entice people into this method of payment.
Good for him in an number of ways
- he's offering customers another method of payment, likely attracting more customers who may not immediately be able to pay someone else to get their new kitchen.
- if they don't pay, the finance company will probably have the minerals to get the payment from the customer, however he's likely to get paid up front, probably less some commision fee from the Financier.

I know that MFI operate on a Pay up front, (pay total amount prior to installation) or via a personal finance option.

SouperComputer

Our two C words for the day are Contracts and Credit Insurance.

He can charge a deposit if he wants, in fact he would be insane not to. In his (Essential) contract it should specify the payment terms and at what stages payment is due. I work as an IT contractor BTW.

The contract should include the following:

1. Clear guidlines as to the payment terms and stages.
2. Description of work to be carried out, include diagrams if needed
3. Materials to be used
4. Costings (including provision for reasonable adjustments for unforseen situations)
5. The responsibliltes of the customer and provider, including any change of mind or cancellation timscales and financial penalties.

I generally charge in three stages, these are explicitly explained in the contract before work commences:

1. Deposit (30-40% on total quote depending on client, equipment needed etc)
2. Remainder of payment on goods when all equipment\material on contract is delivered
3. Balance of payment, generally labour.

If you go for this strategy, at worse case scenario you will just be shafted for the labour and not the goods\materials that you have spent money on. Of course you will be aiming to make a margin on the goods too so all is not lost.

Also, if a job becomes more tricky\messy than expected and begins to monopolise your time, the above payment scheme helps your cashflow, which is the lifeblood of any business.

My offical stance is that I do not offer credit. Realisticaly however, I generally offer 5-10 working days. A couple of clients that I deal with on a monthly basis get 28, but If I dont have a cheque on the 29th, their work sits here until I get the cheque. Again, this is explicially mentioned in the contract.

The good thing about credit insurance is that they will force you to put good credit proceedures in place.

GET A DEPOSIT!!!! Not to do this is suicide! You want the deposit to keep cashflow if nothing else!

BrentMaster

Thanks Guys, you have all been very helpfull.

If he is to draw up a contract will he do it through a solicitor to get the legal terms and conditions right or can he just draw it up himself?

SouperComputer

he can do it himself, but a solicitor is a very good plan.

TempestSabre

He'd be insane not to ask for a deposit. When I was working freelance, one of the hardest things was getting money out of people.