Early Payment Initiative: Are you getting paid on time?
The UK was one of the first European countries to introduce late payment legislation back in 1998 with large firms being charged interest for late payment to small firms. In 2002 the legislation was amended to include payment from small firms also. In a nutshell, this means that all business, regardless of size should pay for goods and services in a fair and reasonable time scale. This is known as the Prompt Payment Scheme
Due to the positive success of the Prompt Payment Scheme, the Government introduced a series of Early Payment Schemes which ensure that all businesses no matter who they are doing business with can access a scheme which encourages timely payment.
Early Payment Schemes Introduced
In March 2013, the legislation was reviewed and a process implemented that makes chasing late payments a simpler process for small business. The Government pledged their support for early payment programmes where clients receive an incentive for paying early or in accordance with agreed payment terms. This is no longer just limited to business to business transactions, but to anyone who does business i.e. an electrician carrying out work in a clients home.
The rewards of paying on time far outweigh just the payment aspect. Prompt payment increases confidence amongst business owners which ultimately leads to investment and growth. Concerns over late payment or even non-payment can have overall adverse effects on economy recovery.
How late payment is affecting electricians
The introduction of Early Payment Schemes seems to a positive step forward particularly for electricians and small electrical contractors who carry out most of their work for members of the public. According to the payment organisation BACS, small and medium sized businesses are owed an enormous £35 billion in late payments which equates to approximately £45,000 per business.
Almost one year since the introduction of Early Payment Schemes, we decided to survey electricians across the UK to find out if such initiatives had any effect on their business in terms of getting paid quicker and how well the scheme works in reality.
Analysing the results
We had another great response to our survey and getting paid on time is certainly a subject that is important to electricians. There were two things that were particularly apparent in the comments made to our survey.
• Taking payments upfront for larger jobs
We had a number of comments surrounding payment for work that exceeding £1000 in value. A growing number of electricians are asking for a percentage of the total payment in staged payments. A good example of this is 50% of the payment at the end of the first fix and the remainder at the end of the second fix. One electrician has worked in this way for the past 5 years without any problems.
It certainly seems that staged payments is becoming favoured by both electricians and their customers. Operating a staged payment policy increases your chances of being paid and less chance having to chase for the payment once the job is complete.
• Payment terms
Invoices are an absolute must and payment terms must be clearly stated on them. Most of the electricians surveyed were happy with payment within 7 days of the job finishing. 98% of small jobs were paid for without any problems with only 1 electrician reporting a payment taking 90 days or more to receive.
Are Early Payment Initiatives Working?
Offering flexible payments is proving to be a good early payment initiative as far as electricians are concerned. 77% of survey respondents are paid within 14 days of the job completing with an additional 13% being paid before work begins. Only 7% of electricians are reporting later payments. A mix of fair business practices particularly offering staged payments to clients as well as clear payment terms on invoices is ensuring timely payment for electricians.