One of the most common issues affecting electricians is payment disputes with customers arguing over the cost of the work once the work has already been completed.
The problem with disputes, aside from being time-consuming and costly to a business, is that they are often a tactic used by bad payers to delay or completely avoid paying for the work.
A large portion of our more than 52,000 SME clients with outstanding debts are electricians, and they have cited this as a growing trend and concern.
In some cases, the disputes are genuine; but in other cases, they aren't - and that is when they negatively affect your bottom line.
When a dispute is raised, it invariably means that your account is either not going to get paid at all or will only get paid after a fight, regardless of who is in the wrong.
There are, however, simple steps you can take to significantly reduce the likelihood of a dispute, enabling you to recognise a genuine dispute from a dubious one
Have a clear mandate for the work to be completed
One of the most common reasons bills in the electrical industry are disputed is due to a problem arising during the job which needs additional work. In some cases, the customer is not made aware of the changes and is therefore surprised when the final bill arrives.
The nature of the job means, despite quoting a price before commencing work, you never really know exactly what the job will entail until you get into it. You may uncover some unforeseen work that requires urgent attention.
Unfortunately, this situation cannot be avoided; however, it is the worker's or business owner's responsibility to drive the communication.
Firstly, obtain clear and concise information from your customer about the works which are required. This will give you an idea of what they expect to be done and what would be considered 'out of scope' and subject to a dispute.
Furthermore, for immediate or emergency work, it's important not to simply respond to a request for service without first examining the issue and providing a cost estimate. Be proactive in seeking a solution that the customer is happy with.
Provide a detailed quote
Once you have reviewed the job, you'll be able to provide a clear quote which outlines not only the work you will be undertaking but also what won't be covered.
If there are areas of uncertainty which will only be fully understood when the job commences, ensure that your quote fully covers for this eventuality.
Incorporate your trading terms in your quote, clearly detailing the customer's payment obligations. This will protect you from any legal challenges should your customer dispute the payments.
An important clause to include in your trading terms is providing that, in the event of the customer falling into default, they will be liable for all collection costs incurred by you. This enables you to recover unpaid accounts without worrying about additional costs.
The customer must sign your quote before you commence work. This provides you with a written guarantee that the customer agrees with your terms and will adhere to them. If not, they have accepted that they are liable to the consequences. Do not begin work until they have signed.
Know who your customer is
It sounds strange, but it is critical to know who is ultimately responsible for the work being done, as they are the person responsible for paying you. This is so simple but so easily overlooked. For example, if you are dealing with a real estate agent, ensure they have the authority from the property owner for you to carry out the works. If they don't, you need to get sign-off from the person who does, or you won't have an avenue to pursue if payment isn't made.
The easiest way to understand who is ultimately in charge is to send them a new customer application form to complete. This ensures you are dealing with the correct legal entity.
The form should include several questions in order to fully understand the customer, their business (if applicable) and their background, including contact details, where they work and their address.
If the job is a significant one, call the customer's accountant or request some trade references in order to be reassured that they have the capacity to pay your account.
If you are doing work for a private company, you need to get guarantees from the directors of the company to mitigate your risks if the business collapses.
If there is a variation to the job, always obtain concise authority from the customer to proceed with it. Specify what the extra costs will be and always confirm by email to the client so you have written evidence should they refuse to pay.
Don't just take it on without consultation and approval first. Most likely, they have only budgeted for the work you originally quoted and could be unable or unwilling to pay anything extra. I suggest you discuss a payment plan with the customer if the additional work would cause hardship, and have them sign it to ensure they are committed to paying you for it.
On completion of the job, confirm in writing that it is complete and request that they contact you within 24 hours if they have any issues with the work.
Ultimately, it all comes down to clear communication between you and your customer. You would be surprised by the number of accounts that could have been resolved by simply communicating better.
When you do receive disputes, respond to them quickly. If it is genuine, deal with it. If it isn't, treat the debt as a potential bad debt and, if you can't resolve it, refer it to a debt collection agency immediately.
If you diligently follow these steps, you will be better protected and have a solid foothold to obtain judgment and receive payment if a customer raises a dispute. But most importantly, they will dissuade most customers from trying to dispute payments, saving you time and money.
What to include in your quote:
- What work is covered by this quote?
- What work isn't covered?
- How long should the work take to complete?
- What possible issues may arise from this type of work?
- What would need to be done to fix these issues?
- How much would this additional work cost?
- Outline your trading terms - all bills must be paid within 30 days. If the customer refuses to pay, they are liable for all collection costs.
- Have the customer sign this form before work commences.
*Roger Mendelson is CEO of Prushka Fast Debt Recovery and Principal of Mendelsons National Debt Collection Lawyers. Prushka acts for in excess of 53,000 small to medium-sized businesses across Australia and operates on the basis of no recovery - no charge. Roger is also author of 'The Ten Mistakes Businesses Make and How to Avoid Them' and 'Business Survival', both published by New Holland Publishers in 2009.
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