Steps to Get Paid On Time For Tradies: A 7-Step Guide to Be Paid on Time
How many times have you completed a job only to wait weeks—or even months—for payment?
It’s a scenario every tradie dreads. Outstanding invoices and poorly managed accounts receivable aren’t just frustrating—they’re dangerous. They disrupt your cash flow, strain your business, and even jeopardize future work. But the good news? You can turn things around with a few smart strategies.
At ACT Tax Group, we understand the unique challenges of Australian tradies. Whether you’re an electrician, plumber, or builder, getting paid on time is critical for your success. With these seven actionable steps, you’ll not only keep the cash flowing but also build stronger client relationships along the way.
Let’s dive in.
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Understanding Cash Flow Management
Cash flow management is the lifeblood of any business, especially for small business owners. It involves tracking and controlling the inflow and outflow of cash to ensure that your business has enough cash on hand to pay bills, invest in opportunities, and handle unexpected expenses. By keeping a close eye on your cash flow, you can predict future cash flow needs and make informed business decisions that keep your operations running smoothly.
Effective cash flow management means more than just knowing how much cash you have today. It’s about understanding your financial patterns and planning for the future. This proactive approach helps you avoid cash flow issues that can disrupt your business and jeopardize your profit margins. By mastering cash flow management, you can ensure a steady cash flow and focus on growing your business.
Step 1: Crystal-Clear Communication
Before you even pick up your tools, start with a conversation. Clear communication helps prevent clients from finding excuses to delay payment, which can negatively impact your cash flow. Explain your payment terms to your client—due dates, accepted payment methods, and late fees, if any. This eliminates misunderstandings and sets expectations right from the beginning.
Pro Tip: If possible, put these terms in writing within your quote or contract. Clients are more likely to follow through when agreements are documented.
Step 2: Embrace Mobile Invoicing
Still relying on paper invoices? It’s time to upgrade. Mobile invoicing apps like Xero, MYOB, or QuickBooks let you send invoices instantly—right from your phone.
Why it works:
- Draft invoices as soon as you complete the job.
- Add photos of completed work to enhance clarity and transparency.
- Track payments in real time to stay organised.
As tradies, your time is limited. Mobile invoicing ensures you get paid faster without compromising your workflow.
Step 3: Never Leave the Site Without Invoicing
How many times have you rushed to another job or picked up the kids from school, only to realise days later that you forgot to invoice the client?
This habit not only delays payments but also leaves money on the table.
Commit to drafting and sending the invoice before leaving the site. By making this non-negotiable, you’ll see a dramatic improvement in your cash flow.
Step 4: Invest in an EFTPOS Machine
When it comes to one-off jobs, having an EFTPOS machine is a game-changer. It allows you to process payments immediately, reducing the risk of delays or missed invoices.
For residential jobs, customers often expect to pay on the spot. An EFTPOS machine ensures you walk away with payment in hand, saving you follow-ups down the road.
Step 5: Automate Payment Reminders
Even the most organised clients sometimes forget. That’s why automated reminders are your secret weapon.
Set up a schedule:
- 2 days before the due date: Friendly reminder to ensure payment is on the client’s radar.
- On the due date: A polite nudge, reinforcing the importance of timely payment.
- 7 days past the due date: A firmer tone, encouraging immediate action.
Apps like Xero allow you to customise these reminders, saving you time while keeping communication professional.
Step 6: Follow Up Like a Pro on Overdue Payments
Automation helps, but sometimes you need the personal touch. If reminders go unanswered, don’t hesitate to call the client directly.
Here’s how to do it:
- Keep the conversation professional and respectful.
- Clearly state the overdue amount and ask when payment can be expected.
- Document all interactions for reference.
Consistency is key. By staying on top of overdue payments, you demonstrate that you value your work and expect clients to honour their commitments.
Step 7: Cultivate Strong Client Relationships
At the heart of any successful business is trust. Building positive relationships with your clients makes them more likely to prioritise your payments.
Small gestures can leave a big impact:
- Send a thank-you message when payments are made on time.
- Deliver excellent service that clients will remember.
- Keep communication open and transparent.
- When clients see you as a reliable and approachable professional, they’re more inclined to respect your payment terms.
Setting Up for Success
Setting up for success in cash flow management starts with laying a solid financial foundation. Begin by creating a detailed budget that outlines your expected income and expenses. This budget will serve as a roadmap, helping you set realistic financial goals and track your progress over time.
Next, implement a robust financial management system. This could be as simple as using accounting software to monitor your cash flow or as comprehensive as hiring a financial advisor. The key is to have a system in place that allows you to make informed decisions about investments, funding, and other financial matters.
By setting up for success, you can avoid common cash flow issues and ensure a positive cash flow. This proactive approach not only helps you manage your day-to-day operations but also positions your business for long-term growth and stability.
Creating Effective Payment Terms
Creating effective payment terms is crucial for managing your cash flow and ensuring you get paid on time. Start by establishing a clear payment schedule that specifies when payments are due. Be sure to communicate these terms to your customers and suppliers upfront to avoid any misunderstandings.
Specify the payment methods you accept, whether it’s cash, credit card, or bank transfer. Also, outline the consequences for late payments, such as late fees or interest charges. This not only sets expectations but also encourages timely payments.
Regularly review and optimize your payment terms to ensure they remain effective. By creating and maintaining clear payment terms, you can reduce the risk of overdue payments and unpaid debts, keeping your cash flow healthy and your business running smoothly.
Managing Late Payments
Managing late payments is a critical aspect of maintaining a positive cash flow. Start by having a plan in place to handle overdue payments. This could include sending automated reminders, making phone calls, or even sending formal letters.
When a payment is overdue, act quickly. Send a friendly reminder a few days before the due date, followed by a polite nudge on the due date itself. If the payment is still not received, follow up with a firmer reminder a week later. Consistency is key in managing late payments.
By effectively managing late payments, you can reduce the risk of cash flow issues and ensure a steady cash flow. This proactive approach not only helps you get paid on time but also strengthens your financial management practices.
Reviewing and Optimising
Regularly reviewing and optimizing your cash flow management practices is essential for business success. Start by reviewing your financial reports to identify areas for improvement. Look for patterns in your cash inflows and outflows and make adjustments as needed.
This could involve tweaking your payment terms, adjusting your budget, or implementing new financial management strategies. The goal is to ensure a steady cash flow and avoid financial difficulties.
By regularly reviewing and optimizing your cash flow management, you can make informed decisions that keep your business running smoothly. This proactive approach not only helps you maintain a healthy cash flow but also positions your business for long-term success.
Why Positive Cash Flow Matters
Getting paid on time isn’t just about cash flow—it’s about running a stress-free, efficient business. By implementing these steps, you’ll not only improve your financial health but also free up time to focus on growing your business.
At ACT Tax Group, we’re here to support tradies like you with tailored accounting and advisory services. Whether it’s streamlining your invoicing process or setting up automated reminders, we’ve got the expertise to help.