Taking on a new client
If you're in the building and construction industry, working with new clients is a regular part of your business but it does come with risks.
Before you start working with a new client, it's important for you to protect your business. These steps can help you to reduce the risk of future disputes and unpaid debt:
1. Get to know your client
Having a conversation and asking questions can help both you and your new client figure out if your work standards match and whether the relationship will succeed.
Consider asking questions such as:
- why they’d like to work with you
- how they found your business
- how they like to communicate
- what their budget and timeframes are
- if they have any specific requirements in relation to the job?
2. Do your research
Doing a background check on the client can give you peace of mind or alert you to potential issues.
Start by doing a simple internet search using the client's contact numbers and addresses. It's important to have a physical street address to ensure you can locate the client if necessary. This could help if something goes wrong and you need to take legal action.
If the client is a business or company there 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 client 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 client under other possible business structures, such as a: business, partnership, company and sole trader.
3. Discuss payment
Chasing money can be a difficult and time consuming task. Discussing money early on provides the client with an understanding of their payment responsibilities and can give you an indication of how likely it is that they will pay.
To give you the best chance of getting paid, consider:
- taking a down-payment before you start a new job, with the balance collected on completion
- ensuring your invoices clearly state the payment terms and options
- offering as many payment options as possible
- offering a discount for early payment
- sending invoices out as soon as the job is complete
- sending payment reminders.
Check out our preventing unpaid debt information for more tips.
4. Create a contract
Whether you’re working with a large company on a commercial project or a private client for a small renovation, you should always have a contract.
Verbal contracts are legally binding, but can be risky so it’s best to get your contract in writing. If a written contract isn't possible, make sure you have some documentation that will help you identify what was agreed: emails, quotes, specifications and even notes about your discussions.
Your contract should specify:
- the scope of the work
- commencement and completion dates
- inclusions and exclusions
- payment terms
- an arrangement for settling disputes.
If you don’t know what type of contract to use or what to include, contact a building association, or consider getting legal advice.
Tip: Make sure you understand and agree with any clauses about delays (for example clauses that say you will only receive payment when the client is paid).
5. Understand your insurance obligations
There are specific types of insurance required of 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.
Be sure to discuss insurance with the client and get some advice from an insurance broker or your industry association if you’re not sure.
For more information, read our insurance and workers’ compensation page.