It's pretty exciting, the prospect of embarking on a new business relationship whether it be with a client, supplier or contractor, right? At the same time however, it can be quite a nerve-wracking time; from the worry of any disputes that might arise and how you'll deal with them to the "what if I don't get paid" concerns.
Well, if you're a business working in the building and construction industry, stay tuned as here are some simple and straight forward steps you can take to protect your business as much as possible.
1. Do your research
It is always a good idea to carry out a background check on the client or contractor as this can not only give you peace of mind but can alert you to any potential issues. Start by doing a simple internet search using the client’s contact numbers and addresses. Also, consider asking questions such as:
- How they found your business
- Why they’d like to work with you
- What their budget and timeframes are
- If they have the right insurance/s for the situation
- If they have any specific requirements in relation to the job
If the business/person is a contractor, ask for references and details of previous work completed. You would also be able to find such information on their website, if they have one.
If the client or contractor is a business or company, there are other checks you can do.
- Search for their Australian Business Number (ABN) on the Australian Business Register.
- Find free information about companies, business names and licences from the Search ASIC registers on the Australian Securities & Investments Commission's (ASIC) website.
- Search ASIC’s banned and disqualified register for information on people or organisations.
- To find out if the person is bankrupt, search the Australian Financial Security Authority’s Bankruptcy Register Search (BRS).
- If the client is a company, check if they’ve gone into liquidation using ASIC’s Published notices search.
- Ask your accountant to run a credit check on the person under other possible business structures, such as a: business, partnership, company and sole trader.
2. Employee or Contractor?
Before hiring someone, check if they’ll be an employee or contractor. It’s important you get this right because it affects your tax, super and other obligations.
3. Discuss payment
Chasing money can be a difficult and time consuming (not to mention, sometimes awkward!) task therefore discussing this early on in any transaction can be beneficial. Things to consider to make things even easier:
- Take a down-payment before you start the job, with the balance collected on completion
- Ensure your invoices clearly state the payment terms and options
- Offer numerous payment options if possible
- Offer a discount for early payment
- Send invoices out as soon as the job is complete
- Send timely payment reminders
4. Create a contract
No matter how large or small the job or whether it’s a commercial project for a large company or a private client with their own residential renovation, it is always advisable to have a contract in place – a written one at that.
If a written contract isn’t possible, make sure you have some documentation around agreements, such as emails.
5. Understand your insurance obligations
Be aware of specific types of insurances required for businesses in the construction industry. These often vary depending on your business type and state and territory, but can include:
- Domestic building insurance
- Professional indemnity insurance
- Public liability insurance
- Structural defects/builders indemnity insurance
In some cases, the client may be responsible for insurance; for example, if the client is an owner-builder. If you are unsure, refer to the business.gov insurance and workers’ compensation page
As we mentioned, entering into an agreement with a new supplier is definitely a big decision so it’s important to consider all your options. We hope that the above has given you some food for thought however if you require more information, click here.