Self employed

[1Steven]

Hello, I am going self employed at the end of the month and would be grateful for any positive tips to smooth the path! Many thanks.

 

[Deleted member 7121]

Cash flow ,do invoices as soon as job completed and keep your books upto date from the start.

Good luck

 

[townfanjon]

Get ready to graft your nuts of , but bloody good luck .

 

[Rickster123]

Have a weeks paid holiday before you leave!

 

[lame plumber]

get paid immediately, pay your merchant soon thereafter. Dont over extend yourself, andif you have more work than time, tell the customers to wait a bit, then put your prices up a bit.

Dont go buying new van and tools etc, buy what you need and can afford. Need special tools, put them on the customers bill, remember, cash flow is king keep the money coming in, and take time off, your arent a duracell bunny!

 

[1Steven]

Thankyou, very helpful advice. Have set up credit card payment so hope can get the payment s in quickly.

 

[plumben]

This being my first year SE
Ive found keeping your books up to day important, im surrounded with the last 2 months to get done, and i wish id done them sooner,
Get a diary write everything in it every day, Only takes a minute notes will do
Get a simple set up for your books, excel spread sheet and folder with plastic wallets for each month/big job to keep invoices and bills organised,
Payment on completion or within 7 days make sure the customer knows that,
Give estimates for jobs it'll be between example, it'll be between 60-100 deppending if theres any issues filling the system,
Cash flow is a must, get an over draft on a buisness acount and pay your merchants straight away, then when you need to pay later they'll know your good for it, materials supplied to jobs are paid for on delivery/arrival if exceeding £100

 

[Radioman]

This being my first year SE
Ive found keeping your books up to day important, im surrounded with the last 2 months to get done, and i wish id done them sooner,
Get a diary write everything in it every day, Only takes a minute notes will do
Get a simple set up for your books, excel spread sheet and folder with plastic wallets for each month/big job to keep invoices and bills organised,
Payment on completion or within 7 days make sure the customer knows that,
Give estimates for jobs it'll be between example, it'll be between 60-100 deppending if theres any issues filling the system,
Cash flow is a must, get an over draft on a buisness acount and pay your merchants straight away, then when you need to pay later they'll know your good for it, materials supplied to jobs are paid for on delivery/arrival if exceeding £100

Set up stage payments on big jobs and stick to the agreement, no stage money = pull off until payment. If asked to do extra work during the job make sure you tell custard it's extra, make a note in a no carbon copy book, put price and get cust to sign and give copy, then no arguments at the end. Keep an eye on turnover, it's easy to go over vat threshold, remember vat threshold is calculated 3 ways to establish gross turnover, HMRC web site explains in detail. Have you calculated your break even charge out rate? Take all your costs including van insurance, rfl, servicing, tyres, fuel, public liability, accountants fee, provision for tools, bank charges, wages, EVERY COST OF RUNNING THE BUSINESS. Divide that by the number of hours a month you want to work and that will give you the cost per hour of running your business. Then you will know what you need to make to earn a profit or break even or make a loss.

Failure to do this is exactly why businesses go bust in the first two years.

 

[jewellers]

Going the extra mile when tidying up goes a long way. If the customer comes home to the job finished and a clean and tidy house you'll get a good reputation - Get a Henry!

 

[Radioman]

Check this postBusiness studies for plumbers?
http://www.ukplumbersforums.co.uk/showthread.php?t=86657

 

[Stanios]

Im heading there aswell just sent off my self employment form. Exciting times for us!
What Im being told is to keep all receipts as most purchases you make can be treated as expenses and go against your tax liability.
If you are planning on working through someone else (contractor) register for CIS takes 10 min so you will have 10% less deducted from your pay.

Best of luck bud!

 

[Radioman]

This is my POV as a recently retired tradesman who had many customers try to wriggle out of paying over 25 years. Set your stall out from day one with regard to terms of business. There is plenty of help out there for the self employed regarding debt recovery and the correct processes. Trading standards is a good place to start, offering templates etc. So you must must must get your paperwork in order. This means following the correct procedure and wording for estimates, contracts, additional work to estimate, payment profile, etc. In my experience if a sole trader is not prepared to do this then don't bother starting up in business. The cold hard fact is there are many individuals who just don't want to pay the full price and look for any loophole to avoid paying the full agreed price.

Top tips: with every estimate enclose your Terms and Conditions in which it should state clearly your stage payment schedule, advanced payment for materials, penalties for cancellation, definition of an estimate, state clearly that acceptance of the estimate either verbally or in writing is a contract. Its ridiculous but in UK consumer Law, if you dont offer a customer a way of cancelling an agreed contract and they subsequently dont pay all or some of the invoice, you will have no chance in recovering the debt in court, fact.

If a customer calls you and asks for a "quote" ask them if they want a fixed price and explain the difference between and estimate which is an educated guess and a quote which is a guaranteed fixed price and subject to re negotiation for extras! Don't work for nothing! Your liabilities to Mr Knowledgeable Customer you did a cheap job for are the same as a proper earner so think carefully before taking on work. Make sure you are insured, read the small print on the policy. I found that my insurers of 10 years had stuck a new clause into my policy preventing me from working on buildings higher than 15 meters exterior. When I questioned it thinking they must have thought I had become a roofer, I was told it included internal works due to the risk of extensive damage to floors below. So blocks of flats where out. To increase to all buildings would have doubled the premium with that company. Lastly, pick and choose your customers, many on here will know what I mean without me going into details. You will soon get a feeling for who you want to work for. So you become very aware of who to not to even do a price for.
My SOP for work with over £250 materials was to get money for materials and waste removal either before starting or on the day work started. No money and I would walk. Then agree stage payments on completion of certain work, eg bathroom ripped out, fist fix, tile installed then balance on completion. My aim was to leave no more than 10% on the job on the last day. Get the cust to sign a satisfaction note.

In the last year of business we got a card machine so we could eliminate one more excuse for not paying on the day.

Get an accountant who understands the business. Personal referrals from other trades is the best way. Our accountant saved me thousands over the years. Remember that as SE you will have a small tax bill in the first year but after that tax will be paid upfront in 2 installments based on the previous years profit and loss.

I know this might sound negative but there are lots of positives in being self employed. Would I do it again? YOU BET!!

 

[PhoenixServices]

Very informative, well written post radioman. Should help a lot of people out.

 

[quality]

charge an hourly rate not job by job. If you think its a day quote 2, if you don't get the job then its a bonus do a proper job charge a proper price. Its worked for me since 1992
work can be hard and can mean long days but its only work

 

[1Steven]

Thankyou all very much, these answers are really pointing me in the right direction. It's nice to know that there are so many positive and helpful people out there willing to take the time and make the effort to encourage fellow plumbers. I hope that I'll be able to give a helping hand to people in the future too.
Thanks again guys

 

[dean.diy]

thanks radioman, someone else sharing their hard won knowledge is gold dust. PS. what is POV and SOP?

 

[1Steven]

Thankyou all very much, these answers are really pointing me in the right direction. It's nice to know that there are so many positive and helpful people out there willing to take the time and make the effort to encourage fellow plumbers. I hope that I'll be able to give a helping hand to people in the future too.
Thanks again guys

Sorry double post, multitasking!

 

[SimonG]

Pov i think is point of view and sop i think is standard operating procedure.

Get your estimating right. Dont forget your % on materials.
Be neat, tidy and punctual.
Invoice immediately.
Collect your money as soon as done. Dont fall for sob stories and come down hard on people trying to wriggle out.

 

[dean.diy]

thanks Simon.
Dean.

 

[Radioman]

Thank you for the kind words. Here is a good link on vat thresholds

https://www.gov.uk/vat-registration/when-to-register

The important bit is to remember that HMRC are a humourless bunch who love to enforce the rules to the T. So, the threshold for now is £82,000 in any 12 month period, or you expect to go over that in any 30 day period. So put another way if you turnover, that's invoice values exceed £82,000 in any 12 months past present or forecasted you must register for vat and charge 20% on parts and labour. In real terms that's only £6,900 worth of invoices per month, or £1500 per week. The benefit is that you get to claim back vat on certain items, the biggest downside is you immediately price yourself into a different league of tradesman. One small trick to keep turnover down is to get the customer to supply bulk materials. Several benefits to this: materials do not appear on your turnover, you are not liable for any warranty or guarantee under the sale of goods act, you are not left out of pocket if the customer decides not to pay leaving you with little chance of getting either the goods or the money. Of course you won't be able to up charge materials supplied, but in my view that's a small negative compared to being vat registered. Unless, of course, you are going for it and trying to grow the business and become an employer with premises etc.

So it's worth keeping your books up to date with a simple system so that at any one point in time you can say with certainty: this is my running turnover, this is my current gross and net profit. Sounds daunting but it really is not once you have simple spread sheets set up on excell. In fact I would go as far as to say that after a few months you will soon feel very much more in charge of your business as the unknown is removed.

Turnover is defined by HMRC as
VAT taxable turnover is the total value of everything you sell that isn’t exempt from VAT.

You must register for VAT with HM Revenue and Customs (HMRC) if it goes over the current registration threshold in a rolling 12-month period. This isn’t a fixed period like the tax year or the calendar year - it could be any period, eg the start of June to the end of May.

For a more exact definition of this see
https://www.gov.uk/vat-registration/calculate-turnover

 

[Stanios]

Im actually registering for VAT voluntarily because I see it as inevetable at least registering now allows me to reclaim almost £4000 of vat ive spent on van and tools. Claiming back a hunderd pound or so every month on petrol is another bonus. The biggest downside to VAT as far as I can see is the accounting side or at least the cost of having it done by someone else

 

[mfgs]

Once you register you can claim back VAT from the previous 12 months as well. Registering from the start could be slightly detrimental as you instantly become 20% more expensive on your labour charge. Also almost every customer instantly wants to pay cash to avoid the VAT.

 

[Radioman]

Once you register you can claim back VAT from the previous 12 months as well. Registering from the start could be slightly detrimental as you instantly become 20% more expensive on your labour charge. Also almost every customer instantly wants to pay cash to avoid the VAT.

I agree with this. It's tempting to take cash but if you do I would recommend that you put some if not all through your bank. Mr HMRC is very aware that the plumbing industry can be cash in hand If you can demonstrate that you put cash through the account, you are covered in the event of an inspection. On that subject, if HMRC decides to inspect a self employed person or business, it's the person or business that has to pay for the insect ion even if you are cleared of owing any taxes. I was inspected 18 years ago as the result of a spiteful customer who lost county court claim falsely reporting accounting irregularities to the revenue involving VAT and business taxes. The revenue descended on my house on a Sunday and removed my computers and trading accounts. 3 months and many meetings later I was clear d of all wrong doing and presented with a bill for £8000. Fortunately we had taken out insurance to cover this with our accountants. The insurers then proceeded to recover their costs from the revenue and the customer.

 

[1Steven]

Thankyou all will keep book up to date.