Think Iv'e made it!

[BradNaylor]

Mailee,

The other thing is payment.

Restaurant jobs are notorious for giving difficulty in collecting you money. Make sure you have a written agreement stipulating that you are paid half your money before starting work, and the the other half on completion Not a month later, but on the day you finish. Preferaly in cash.

Dan

Mailee as a new business I would recommend trying to get your money on completion, however there is absolutly nothing wrong with giving terms provided you have the cashflow to cover it.
When you are competing against other companies for large contracts and they are offering 60 day terms then provded I have run credit checks and I have a large enough deposit I have done similar terms in the past, having said that I would be wary of such terms at present.

I think Dan's being a little harsh tarring all restaurant owners with the same brush. Might as well say all retailers are on the fiddle and your unlikely to get paid, which is rubbish, genuinely most people I know don't willingly rip people off.

The Dos's probably got a point in his last paragraph; I can only go from personal experience - but I disagree entirely with his suggestion that extending credit is a viable option for someone in Mailee's position.

The most important thing in a new business is cash flow - even more important than making a profit to start with. With positive cash flow a business can pay its bills, buy materials, function and begin to prosper. Without it, even if a profit is being made on paper, the business will starve to death almost before it has got started.

Any business has a 'funding requirement'. That is, an amount of working capital at its disposal to fund its day to day expenses and to pay for stock and materials etc. This funding requirement must come from either, some, or all of 3 sources.

1. Shareholders or the business owner's own funds

2. Borrowings from banks or other sources

3. Advance payments (deposits) from customers and prompt payment of invoices.

For anyone contemplating setting up as a bespoke furniture maker option 3 is by far the most attractive.

For all I know Mailee may have ample savings with which to finance his business. From what he has said however, I don't think he has. I certainly didn't!

Bank borrowings may have been a viable option a couple of years ago, but we are now entering a period where banks are unwilling to lend to any new business venture. Even if they did agree to a loan or overdraft facility, they would insist on onerous terms and security such as a charge over one's home.

By meeting one's business's funding requirement through deposits and an insistance on immediate payment upon completion of work it is perfectly possible to thrive without having any capital to begin with and without having to resort to bank borrowings. Any business that sells its product directly to the public is very fortunate in that it can function in this way. Businesses that supply goods and services to other businesses often get dragged into the trap of extending credit, exposing a gap in their funding which has to be met in other ways.

In my view, this is to be avoided at all costs.

Do not underestimate the funding requirement of even a very small business such as that which Mailee is proposing.

Lets say that the value of his restaurant job is £5,000.

He is going to have to buy in all the materials required to complete it. Lets say this comes to £1200. It is unlikely that he will be given credit by his suppliers as he is a new business so he needs to have the cash.

The job will take him 6 weeks to complete. He needs to be taking drawings (a wage) from his business during this time to pay his household bills. £300 a week would seem reasonable.

So, by the time he has completed the job he has paid out £4000. Even if he takes a 50% deposit and is paid the balance on completion he is still going to be having to fund the latter stages of the project from other sources. If his customer takes a month to pay after completion, Mailee is fooked!

THIS is why I insist on a 25% deposit with order, 25% before starting work, and 50% on completion.

The initial 25% covers the funding gap on the previous job.

The second 25% covers the cost of materials

The balance is all mine!

Of course, after a few years of successful trading, hopefully we have a few grand behind us in retained profits, and can follow the Doc's advice of chasing profit rather than cash-flow. Ultimately, this is the way to riches.

In the early days of a new business however, Cash is definitely King!

Cheers
Dan

 

[Digit]

When I was in business I extended credit only to pensioners, and then only when accompanied by both grand parents.
Never had a defaulter!

Roy.

 

[big soft moose]

In fact, I would build in a 10% discount into your price that you can give back if he pays you in £20 notes, rather than a cheque. This is nothing to do with tax evasion; it is to improve the chances of getting paid. Virtually ALL restaurant owners are on the fiddle to some extent or other, and have fair chunks of cash kicking around. If he thinks you are giving him a special deal and he is saving money he will more than likely go for it and use his stash to pay you. Otherwise you will simply join the queue of other suppliers waiting for him to write out a cheque.

And cash doesn't bounce!

forgeries do !

dont get me wrong dan is spot on re making sure you are paid in the folding stuff , but if someone is paying you a large ammount in 20s its worth investing in one of those pens that shops use and checking a random sample.

I do freelance photography work on occasion and it wasnt that long ago that a client paid me £200 in 20s and every other one was a snide. To be fair it wasnt the clients doing, he had got them from a cash machine in good faith. But if the client hadnt been a stand up guy about it I would have been well out of pocket (Or reduced to passing them off in shops, pubs etc piece meal)

 

[mailee]

I will be taking the cash route for the work I do at first as I have very little cash to hold me over until payment, (I am not banking on the redundancy from work) I will be taking a leaf out of Dan's book and taking the 25% deposit with another 25% on start of work with the final
50% on completion. I will of course just trust that I don't get any iffy notes but will look into buying one of the pens That Big soft moose mentioned. I am still looking for the cheap chairs at the moment though.

 

[Mattty]

I will be taking the cash route for the work I do at first as I have very little cash to hold me over until payment, (I am not banking on the redundancy from work) I will be taking a leaf out of Dan's book and taking the 25% deposit with another 25% on start of work with the final
50% on completion. I will of course just trust that I don't get any iffy notes but will look into buying one of the pens That Big soft moose mentioned. I am still looking for the cheap chairs at the moment though.

I used to use this firm a lot for Pub refurbs i was doing 2-3 years ago. I don't know if any of it's the style you want but they where remarkably cheap, and designed for a commercial enviroment.
http://www.trentpottery.co.uk/

 

[Charlotte]

I'm going to agree with a bunch of others here on the money thing.....

Refurbing a restaurant at the moment sounds something that cuts both ways. Someone mentioned that restaurant are always on the fiddle and much as I'd like to jump up and down and say it's not true, they are by and large good people - I spent 5 years working as a chef....what d'ya want stories of? Drug dealing? Credit card fraud? Money laundering? Theft? Assault? ABH? That was just the stuff I knew about - not the rest I suspected!

I'm sure you know about the three wise monkeys - but I suggest you find a forth to guarantee you do not end up out of pocket. I would also ask questions is they AREN'T willing to pay cash - as banks now charge businesses to deposit cash you are doing them a favour.

With the doom and gloom covered - congratulations on the gig!

 

[superunknown]

This is a very interesting thread with some great advice. I have done time making chairs, definitely buy them in if you can.

The very best of luck to you.

 

[Doctor]

if you chose the cash route then I would stop broadcasting it, whether or not you chose to declare it.
I already know that you will have large amounts of cash in your house at some point in the future, so will other people, 25% or 50% of the job you are talking about is substansial,
Its not rocket science for someone to find out your address. Our corner shop regularly gets done over for a few hundred, so be careful.
If its not declared then never mention it again, people get fed up of others who avoid tax and tend to make nasty phone calls.
Should you be investigated you will be required to prove your innocence, they will investigate what tax you have paid on all your sidelines to date.
I know it sounds sinister, but its the truth.

 

[big soft moose]

if you chose the cash route then I would stop broadcasting it, whether or not you chose to declare it.
I already know that you will have large amounts of cash in your house at some point in the future, so will other people, 25% or 50% of the job you are talking about is substansial,
Its not rocket science for someone to find out your address. Our corner shop regularly gets done over for a few hundred, so be careful.
.

its a good point but we do need to keep the paranoia under control or we'd never talk about anything - what about waka and philly and co with all those planes (which must be expensive and therefore nickable), what about the hundreds of other members with liftable power tools etc etc - its not just cash that gets stolen.

while I agree its not rocket science to get an identity and an address for an online name , its a rather larger leap for a neer do well to be looking here in the first place, and to just happen to see this thread, and choose to target mailee.

Also there may be other things less easily found out - like he might be a double black belt , or may be he has a rottweiler or four, or a next door neighbour whose a cop , or....

My advice - assuming you are declaring the cash - is not to keep it in the house at all, go straight to the bank with it (and get a couple of heavy mates to accompany you if walking down the street with that much worries you)

and yes - declare it , while you may feel that your fledgling buisness needs it more than mr browns "lets invade another foreign country" fund the penalties for getting caught evading are not worth the risk , and you never know when the next client might turn out to have a husband, wife, lover, brother, sister, freind etc who works for the infernal revenue

 

[Doctor]

I meant broadcast in general, not just this forum, if people know you work in cash, people will know you must have cash at home.
House burglars number one choice is cash i would have thought rather than planes.