Rules for Getting Paid


Business 101 – How to Get Paid

getting paidRegardless of how exciting your Web 2.0 project is and how ‘cutting edge’ your technology may be, it’s still important to pay attention to the most fundamental principle of business – making sure you are getting paid.

The risk of being ‘dudded’ is reduced by following a few simple rules. Despite their simplicity, it is surprising how often these basic business principles are bypassed or forgotten.

Structure your business processes and secure your right to payment.

Rule 1: Identify Your Client

It sounds simple, but the complexity can be hidden under the surface of a business name or blurred by our failure to correctly identify the entity that is to pay. Often, this is due to the haste of agreeing to a job that’s “just for a couple of days”.

Time for some basic legal theory: Businesses are generally structured as sole traders, partnerships or companies. The type of structure makes a big difference to who has to pay.

A sole trader may operate under their own name or under a business name (registered with the Department of Fair Trading in the respective state). Sally Smith, as an individual, is liable for her debts. Don’t be puzzled if she operates under a business name such as ‘Amazing Skills’. The contract is still between you and Sally. Any agreement or invoice should make it clear that Sally Smith is required to pay you. Refer to her as “Sally Smith trading as Amazing Skills”.

The same approach works if Sally is in a partnership with Sam. Contract with Sally Smith and Sam Chung “a partnership trading as Amazing Skills”. The beauty of dealing with a partnership is that they are both bound to pay any debt the partnership owes. So, if one partner can’t or is unwilling to pay, then the full debt can be recovered from the other partner.

There are two main company types. The common-garden-variety will have a name like Amazing Skills Pty Limited. If simply named Amazing Skills Limited, it is a public company and is probably listed on the ASX. Corporations can also hold business names or operate through a subsidiary.

Clarify which entity in the corporate structure is engaging you and verify that s) to put pen to paper.

Rule 2: Record the Deal

the person giving the undertaking to pay is authorised to bind the company. Usually senior executives have this power. If a substantial amount of money is involved, it’d be prudent to get a director (or better still two director

That reference to paper highlights a crucial point – make sure you get the deal set down in writing!

Memories fade (not always willfully) and a written record can clear things up. It also provides excellent evidence of the debt if things turn sour.

Rule 3: Use the Correct Address

Cite the other party’s registered office address on your agreement and any invoice. Send all correspondence there. This removes any question about whether proper notice of the debt was given.

Taking Action

If things turn ugly, there are cost-effective ways to boost the heat. A solicitor’s letter often gets the desired result. Or you could make use of a Small Claims Tribunal or local Magistrates Court. Sadly, the structures vary in each State as do the monetary limits (around $5,000 -$10,000).

If it’s enough money to buy a new car, the correct jurisdiction will probably be a District Court. More serious cash means your matter is destined for the Supreme Court – and all that involves.

The above rules aren’t fail-safe, but they are sound defensive measures. Adherence will help ensure you are fairly rewarded.

About Mark Toohey

Mark Toohey is an experienced commercial lawyer who has worked with both major law firms and as a general counsel in the media, telecommunications, software and IT industries. He has been a lawyer, company director, online marketing executive, company secretary and entrepreneur. Mark's commercial experience extends way beyond the theoretical. He has helped launch a number of start-up businesses and his hands on experience was gained from negotiating and documenting deals for a wide variety of business initiatives.