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Run for the hill?

Subcontractor clients want the refund direct and to pay fees after.

Since my last post I've had a few more clients sign up to my quiet practice, and thanks again for the encouragement.

I turned down a subcontractor yesterday, he wanted to pay my fees after he received the refund, but didn’t want the refund to go via me.

I said, sorry I cannot do that. I’m now having my doubts though, as there are plenty of people who do regular and one off work for me professionally and privately who I pay after they have performed their service, and some I wouldn’t consider paying in advance.

It just seems wrong that he would seemingly have an issue with the refund not being paid directly to him, I'd much rather have the fees before I submit the return.

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11th Apr 2019 20:19

You did the right thing.

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11th Apr 2019 20:43

I will not submit the return until I have been paid in full unless the refund comes to me in which case I take my fee out before forwarding the remaining amount to the client

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11th Apr 2019 20:54

A definite no. I used to do it but got bitten by 3 clients, including a £400 one. Got my money eventually from that one but it got paid in dibs and drabs. What was worse it was a 4k refund and client boasted on facebook he'd bought a moto x bike with proceeds.

Now it's refund to me or payment up front.

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11th Apr 2019 21:37

I equally used to think it was harsh when accountants insisted on taking payment for. CIS refunds until I got bumped off one

If they choose to not pay you the fees there is nothing you can do as the invoice will be a small amount so not economic to chase

You will find that if that is first thing they ask you they probably are intending to disappear with the money and probably move accountnts every year looking for easy targets to stitch up

I would only do a CIS if I got the refund now lesson learned

I also try and keep my fee towards top end of local market so that any that do come in are decent people not the bottom feeders

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By marks
11th Apr 2019 21:41

Its your business, and its your rules.

We dont submit anything until it is either paid first or refund that will come to us which covers our fee with balance being transferred to client.

No one has ever had a problem with it.

If you dont do that then you lose leverage. Most people will pay on time, some will pay after a while and some will never pay.

If you have debt then it costs you time and effort chasing the debt and worse still additional time chasing through small claims.

Solve the problem by getting paid in advance of submitting. Anyone who does then isnt the right client for us.

There plenty or work out there without the hassle of being a debt collector.

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11th Apr 2019 22:27

I never take clients refunds. I see fee collection as a separate issue but we are established, so maybe its easier for us.

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to Kaylee100
12th Apr 2019 09:58

Same here - never had an issue with getting paid after the work was done. You have to judge how much you trust your client to pay you-if you don't, should they be your client at all?

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to Kaylee100
12th Apr 2019 10:30

Kaylee100 wrote:

I never take clients refunds. I see fee collection as a separate issue but we are established, so maybe its easier for us.

Check you out being established and all!

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to MissAccounting
12th Apr 2019 10:54

Well it does seem to be a difference in scenario. And one that the OP might feel puts them in a different position to us and so they will take a different view to us. However, I still stand by my decision that collection of fees (office money) and refunds (client money) are different things.

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By Mr_awol
to MissAccounting
12th Apr 2019 10:57

MissAccounting wrote:

Kaylee100 wrote:

I never take clients refunds. I see fee collection as a separate issue but we are established, so maybe its easier for us.

Check you out being established and all!

I don't think Kaylee meant it as an insult.

I'd agree that this insistence is probably more common in:
- Newer practices
- Micro practices (i.e. one man bands or 1-2 staff)
- Refund sausage factories.
I'm not aware of any multi partner practices turning over seven figures doing it (although I'm sure several posters will be itching to dispute this) but I suppose there isn't the same need Nobody likes a bad debt and we do have plenty of subbies but I suppose the thought of writing off £300 or so isn't sufficient to shape firm policy. Any of our subbies that do fritter their refunds away normally pay eventually, and the bill often isn't worth the court fee. If they've taken liberties on a previous bill, then obviously we will consider upfront payments, refunds to us, etc on the next one.

Similarly I don't withhold submission until payment. They've paid a professional firm to provide a professional service and I still consider it 'the norm' to invoice upon completion. I'm not going to be sitting on piles of Tax Returns checking to see if they've been paid for before I press submit.

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By NH
12th Apr 2019 06:12

Obviously I do not know the full circumstances but if you have not been established too long the client might be worried that it is you that will take his money and run.
An alternative might be to get him to setup a DD, and tell him you will take his fee as soon as HMRC notify you that his refund has been paid back.
Also, I wonder what you would have done if there was no resulting refund?

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12th Apr 2019 06:28

We have this debate regularly in our office. I am firmly for taking the approach of solicitors ,when buying a house you wouldn’t get the keys handed to you before your fees are paid over as they no longer have any leverage over you!

Unfortunately it’s the way things are nowadays where you must have something to hold against them to get your money otherwise you are at the back of the line. Clients don’t have shame in owing you money anymore, we tend to find our older clients of age 60 upwards will have our billed paid within a few weeks as they are from a time when there was a sense of embarrassment if you were owing money to people.

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By Mr_awol
to PennyPincher
12th Apr 2019 15:35

PennyPincher wrote:

We have this debate regularly in our office. I am firmly for taking the approach of solicitors ,when buying a house you wouldn’t get the keys handed to you before your fees are paid over as they no longer have any leverage over you!

Unfortunately it’s the way things are nowadays where you must have something to hold against them to get your money otherwise you are at the back of the line. Clients don’t have shame in owing you money anymore, we tend to find our older clients of age 60 upwards will have our billed paid within a few weeks as they are from a time when there was a sense of embarrassment if you were owing money to people.

That's not 'the approach of solicitors'. It's how they operate when they are dealing with other peoples' money/property and how a great number of transactions in goods are carried out.

Where solicitors carry out services not related to conveyancing, they normally provide their services, invoice periodically, and collect their fees afterwards. Most will ask for on account payment up front for disbursements (why should they front the cost and take a bad debt risk there) and some may ask for a retainer for contentious work or if they assess you as a bad risk (just like most of us do).

Most work, however, like ours, is billed on completion/in stages, and not paid in full before papers are prepared and/or submitted to court.

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12th Apr 2019 09:21

Consider using direct debit such as Gocardless for fee collection, it means you get paid on time and have a lot more control

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12th Apr 2019 09:44

I would have told them to do one too.

If pushed I would say something like:

"To avoid building in time and costs into our fees for credit control and bad debts, we require all our fees are paid in advance to filing. This ensures you are paying only for time spent on your file and not subsiding unscrupulous clients who do not pay their bills"

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By SXGuy
12th Apr 2019 10:02

Either he pays upfront, or you receive the refund and pass it on less your fee. There is no middle ground personally.

Explain what you would do, once filed, if he were to not pay you? id rather avoid trying to recover my fee.

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12th Apr 2019 10:03

I don't collect tax refunds. Nothing wrong with agreeing a discount or surcharge for early or late payment.

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12th Apr 2019 11:58

This was a new client, if it was a long standing client I would consider it depending on how trustworthy they were.

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By Mr_awol
to SouthCoastAcc
12th Apr 2019 15:29

SouthCoastAcc wrote:

This was a new client, if it was a long standing client I would consider it depending on how trustworthy they were.

I'm not sure it makes that much difference - they are all new at first.

The issue is that you felt it was unreasonable for him to allow you to collect his refund, and then for him to have to wait for you to receive it, check it, and pay it on to him.

He, on the other hand, might feel that it's unreasonable to insist that he has his refund paid to you in this way. It's not your money - it's his. He doesn't know how swiftly you will or wont pass it on to him once received.

Surely you also have some subbies who aren't in a refund position. What do you do for them? Why is this guy any different?

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By JD
14th Apr 2019 20:53

Reasonable to require payment on delivery of records to you or signed return. Once you have built a history with a client, perhaps then provide a supplier account. Should not be a problem for most builders, after all it is the approach of most builders merchants.

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16th Apr 2019 18:43

Haha.. I would have taken him and set up a monthly s/o at £25 a month and done his return in 3 months time..

My Trade debtors are 7.6% of annual gross sales
I try to keep bad debts down to less than 0.5% of turnover a year I usually manage.
Its just a cost of business and why everyone gets charged an extra £2 in my fee calculation as a bad debt insurance...

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By djn
16th Apr 2019 19:17

For a subcontractor it's just not worth the hassle in not having the refund direct to your client account.
Everyone of the subbies that I have ever dealt
with have been happy to do this.
If they refused then I would ask for payment up front, Monthly payment in advance or just say no.
You did the right thing.
We are a multi partner firm and it's just the way we have always operated and it works well.

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16th Apr 2019 21:39

I tell new subbies that they get their refund quicker if it's via me, which I think is true. I always transfer same day.

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