EOW Reflections: Resolution #1: get paid
A Happy New Year to one and all and best wishes for 2025, especially to the half of UK adults who want to start their own business this year. According to the latest StartUp Ambition report, from Enterprise Nation nearly half of UK adults (47%) are considering starting a business or side hustle in 2025, significantly more than previous years, and up 12% on 2024.
Entrepreneurs are fundamental to the UK Economy and its growth. We couldn’t function without them, particularly those running the Small and micro businesses with fewer than 50 employees that make up 99.6% of UK business and are responsible for 50% of employment and 75% of innovation.. Good luck whatever sector you choose to work in but please may I intervene at this early stage and offer one piece of advice: take all the help you can get.
Running a business is lonely. It’s hard work. You wear all the hats (sales, marketing, finances, accounts etc) until you get big enough to recruit people with expertise. Family and friends will be supportive but if they’ve not been there themselves there’s only so much they can do to help. Look to business advisers, trade associations, membership organisations, accountants, bookkeepers, lawyers, networks for help. You may think you can’t afford to pay for professional advice but it’s more likely that you can’t afford not to. They will help you to put all the building blocks in place for a successful business and that allows you to do the stuff you’re passionate about.
From my own experience the key to running a successful business is understanding and managing cashflow. Without cash coming in when you need it you may be unable to pay the bills, struggle to borrow to cover the shortfall and fail for lack of cash.
I learned the hard way that it all starts with the contract. I got terribly excited about the offer of a significant piece of work and was certain I’d soon own a large multi-national. I forgot to check when I’d get paid. Before you take on any work, as part of the contractual terms of trade with your customer make sure you know what the payment terms will be. Set your own terms. If the customer doesn’t want to accept your terms negotiate but if the only payment terms on offer won’t work for you be prepared to walk away. That takes a lot of courage, but if you won’t get paid for your work until 3 or 4 months later, and you can’t survive financially until then, your business will be bust.
People may suggest you can borrow to cover the bills in the gap but that money can be difficult to come by or too expensive, especially in the early days. Work out when you will need to be paid by and don’t allow a bigger customer to bully you into accepting longer payment terms, which will suit them but leave your business vulnerable.
30 days is the default payment term if there’s been no discussion about payment, up to 60 days is acceptable if both parties agree, but longer than that is only acceptable if it’s not ‘grossly unfair’ to both parties. It’s very hard to argue later that 120 days payment terms were grossly unfair to you if you accepted them as part of the contract. Know in advance when the money will hit your bank account. That way you can plan. You can also take action if the money doesn’t arrive on the agreed date. Getting paid fairly and quickly allows you to invest and grow.
Verbal contracts are binding but it’s difficult to prove 3 months down the line that you were to be paid in 30 days if there’s nothing in writing. Make sure all the terms of doing business with a customer are in writing and that you fully understand what you’re signing up to before you start. There’s information on our website and we’re here to help if you get into payment disputes with bigger customers.
Start as you mean to go on: know when you’ll get paid and how to avoid the pitfalls of poor paying customers. Getting paid quickly is key to business success.
New Year Resolutions:
Set out your own payment terms and have the courage to walk away from customers who won’t negotiate.
Check out customers before you agree to supply them. Poor payers may be in financial difficulties. Look for better paying customers to work with.
Chase invoices straight away it they aren’t paid on time and charge interest and compensation.