Sargent's solutions - Communicating contract terms

Presenting terms and conditions is expected of you as a contractor, writes Alan Sargent

Writing my last column (The art of getting paid in good time, HW 19 February), I was only too aware of the constraints placed on any attempt to offer sound and practical advice in a short article. The question raised was that posed by clients who treat invoices as something to be queried and payment thus delayed. In that feature I concentrated on sole traders and I will now expand into the world of larger companies while recognising that we all have the same difficulties.

Asking for payment

When I started out as a self-employed gardener in 1968, I absolutely hated asking for payment for my work, and I am sure that many of you will feel precisely the same way. The stomach knot when plucking up the courage to present your bill is something you will never forget. Only when I became a married man with two stepchildren to support did I determine to be more forceful with myself.

As my projects grew in size, complexity and financial scale, I began to become very strict with my payment structure. Only when I finally recognised that I was the contractor and the client was my customer did I become properly professional in my outlook and company documentation.

Strict regime

Once I began presenting my terms and conditions - not only payment structure but also a comprehensive set of "rules of engagement" clearly setting out in step-by-step detail how the work was to be carried out, in what order and at what stage monies became due for payment - I realised that this strict regime was expected of me as their contractor.

Anything less than complete professionalism was a cause of concern. Even if the client is not fully aware of or could rationalise their caution, if a contractor is not able to control their own business, then how professional would they be once the job was accepted?

Payment and finance are the solid foundation of running any company, and it is therefore vital to develop your own version of an efficient organisation. Once the project has been properly priced, written quotations provided and materials agreed, a timescale should be programmed with dates and durations recorded as a materially important part of the contract.

This programme should be agreed in writing and signed by both parties. The quotation should be time-critical - open to acceptance for a limited period only - to prevent any issues should they come back to you in a year's time and ask you to proceed for the same price.

Pro forma invoice

I strongly recommend that the next step is to raise a pro forma invoice. This is not an invoice inasmuch as it needs to be recorded and filed as a work invoice for tax purposes and does not require an invoice number, only a date. The amount will vary from firm to firm, although I suggest at least 25 per cent of the project total, more if specific non-standard items are to be included and not obtainable from the contractor's normal suppliers - payment is required with an order for any particular item.

On some projects, I would ask for 25 per cent of the project total minus any "specials" plus the whole amount of the unusual item. Otherwise, if the contract does not proceed for any reason, you may be lumbered with something you do not want and perhaps cannot sell on.

Once the pro forma invoice has been paid in full, with the money actually in your bank, you should issue a normal invoice with a number, date and tax point.

How you proceed with the rest of the contract will vary from project to project, but assuming a, say, four-week scheme, you may decide to seek interim payments against materials on site and works completed. These may be referred to as stage payments if they coincide with a particular amount of work or area completed, or interim payment claims if they are diary-based - weekly or fortnightly.

It is helpful if you maintain a strict record of these trigger points and ask the customer to sign off each part of the job as and when you present an invoice raised against whichever system you have agreed.

Terms and conditions

Somewhere in your terms and conditions there should be clear notes stating that:

- Late payments shall be subject to a 2.5 per cent surcharge above the base bank rate of interest at the time of the invoice.

- In the event of non-payment for works completed, or for any reason outside the control of the contractor if the contractor is obliged to leave site until payment has been made then a separate charge may be applied to cover the costs of leaving and returning.

Obviously, this is very much a last resort, but it is an important part of your tender documents.

Some people may best be described as "professional non-payers". Having a strict and clear set of terms and conditions you should be able to avoid these customers. If you are seen as a bona fide contractor, with fixed terms and conditions and professional standards of business, you should avoid the worst of these difficulties.

We all know that some people are natural bullies and like to be thought of as tough businessmen and women, and I find it preferable to maintain a strict barrier between contractor and client. "I will carry out agreed works to a high standard and you will pay me for those works in a timely manner."

Alan Sargent is an independent gardens consultant at the School of Garden Management.

- See


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