Why do all contractors want to be paid in cash?

[Jaggerdagger]

Yet another contractor today has asked for cash to pay for a service. They are seemingly a legitimate business with a website and plenty of good reviews on Google. I never have cash on me so frankly it's a pain to have to walk 30 minutes to the nearest cash point, when I could do a bank transfer in seconds. If it's more than a couple of hundred pounds, I have to drive miles to go into branch to take the money out. They never advertise that they are cash only when I book their services, so I get caught out unprepared. I'm self employed myself, and have absolutely no problem with people paying me in cash, but equally have nothing to hide with my accounts, so happily accept bank transfers! It's nice to remain flexible with my clients! Just curious, really.

This. If someone wants cash payments it’s so they can illegally dodge their financial obligations to others, whether taxes to government or support to their kids.

If it’s really about instant payment they should ask a bank transfer to be made and check their account before they leave.

They can also use either physical card machines or online card systems, so a client can pay by credit/debit card, where there'd be an immediate message of acceptance/declined from the card processing organisation. That avoids the customers who don't "do" online banking and can't make an immediate bank transfer. Physical card machines can be bought for peanuts (often £25 or so), and processing costs for debit card transactions are often pretty low, just a couple of percent and/or a pretty low fixed charge. That's why the likes of low value traders, such as window cleaners, milkmen, etc accept card payments.

if they aren't offering you a discount for paying cash and only mention it at the end I wouldn't be going out of my way to get it for them. I'd say if you wanted cash you should have told me at the start. I don't have cash in the house so either I can transfer it online in front of you now so you can see I've done it, or you can call round in x days when I've had a chance to go to the bank/cash point. So many local banks have closed now for bigger jobs it's a faff to either go all the way into the closest city centre or keep going back to cash points several days in a row (mine will only allow a set amount withdrawal per day)

I've been caught out before when paying by cash- they kept saying they'd drop the receipt around but never did, so I've got no actual proof of when the work (gutting and fascias) was done for when I come to sell on! So I would always prefer bank transfer for that reason but if not make sure I get at least something in writing if I pay by cash.

They’re shelling out for materials up front for people who then delay paying them once the job is complete. In turn this can then affect their ability to pay for the next customer’s materials

Recent builders for us have asked for upfront downpayment for materials. They don't start work until you pay. Seems reasonable. With instant banking now, I don't see why a workman wouldn't get staged payments, paid and cleared while they are on-site, and walk off site if not paid. Who waits until the end of the job to be paid??

@latetothefisting

So I would always prefer bank transfer for that reason but if not make sure I get at least something in writing if I pay by cash.

The rare times we pay for anything in case, we insist on the trader signing a receipt for it. Usually, we'd have his written quote/estimate in hand which we give him with a pen for him to sign and date (they love to turn up without a pen so they can't sign, so we're prepared for that!), but if we've not had a written estimate, we have one of those cheap carbonated receipt books, and fill in a page with his details (i.e. at least name, phone number etc), for the trader to sign in return for us handing him the cash. At least that covers us to some extent if the "promised" invoice never appears.

That depends on the job and the cost of the materials involved. Obviously, if the materials are costing tens of thousands, then obviously the trader can't wait until completion, but in that case, if it were me, I'd be paying directly for the materials to the supplier and getting an invoice directly from the supplier to me. That's what we've done with our relatively modest home improvements, such as for new kitchens, new bathrooms, conservatory, etc. The tradesman has placed the order "on our behalf" given us a reference number, and we've phoned up the supplier and paid over the phone by card, and we get the invoice, made out in our name, so we own the goods. Tradesmen often don't like that as they want to make a profit out of the materials as they pay trade prices, but charge the customer full retail - that's one hell of a cheek when they are charging for all of their time on the job - profiting a second time on materials is taking the piss really.

One time we had a decorator to paint our exterior. His quote included £200 for materials to be paid upfront. When he came to collect it a few days before starting, I gave him £200 in cash and told him I wanted the change back in cash and receipts for the difference. He looked aghast but I said it with a straight/strict expression so he knew I wasn't joking. On the day he started, he didn't say anything, so I asked him for the change and receipts! He started stuttering about needing them for his "books" etc., so I said "that's fine, I'll take photocopies" - it turned out he'd spent less than £100 and didn't have my change, so I said "that's fine, go to the cash machine and bring it later in the week" - he'd just spent it! So not only was he wanted to con me out of £100 for "materials", he was also wanting to claim the costs through his books without putting the cash in as sales income to offset it!

I haven't really come across any contractors since Covid who have asked for cash whereas before it was almost taken as a given that you would pay cash. I have come across a few recently that have portable card machines so can take the payment straight away. The technology is more accessible. I used to have a business that would take predominently cash payments and we would in turn get discounts for paying cash to our suppliers. There was no fiddling the books and the discounts were because of cashflow. Other clients would pay them monthly or have to be chased for payment. We preferred it as paying in cash to the bank was more expensive anyway.

@Kazzyhoward if you're that bothered , why not ask him what you need and source and order itself? You're not just paying for the materials, you're paying for his time in sourcing them, his experience in knowing the best ones, his contact list for discounts, and his time and money for transporting them, possibly having to pay for a larger van that costs more to run so they can transport materials. Why are you entitled to that for free? I'm not a sole trader, but I know enough that in manual related trades too many people have to spend their evenings after a day at work doing that kind of work, it shouldn't be unpaid.

So, two recent examples:

Bathroom: Plumber used contractor for kit. Gave us the catalogue, and the name of the guy, we ordered everything direct from them. Plumber paid for it to get the trade discounts, but gave us the invoices for warranties. The price of the items were included in his invoice, no mark up. Everyone happy.

Patio: Fixed price. Split into three payments. In fact poor builders had seriously underquoted for work and materials, we gave them an extra £500 on completion. Everyone happy.

He'd already allowed for his time etc in his time element of his estimate and specifically mentioned time for buying materials in the narrative of his, very comprehensive, quote as to what was included in the time fee quoted. In fact, on the morning he arrived, he went for the materials on his way, and as a result of that, arrived about an hour later than he did on the other days, and he charged a full day's labour for that, so his time for collecting materials was part of his daily bill, and the receipts he provided were dated that morning too! So he hadn't made any special journeys on previous days!

His van costs, ladders and other "tools of the trade" should be incorporated into his hourly rate. If, as you say, we'd bought materials ourselves, he wouldn't have made any extra/hidden profit.

I hate the way that businesses make "hidden" profits - they should be open and upfront. If they want to charge a "handling" fee, fair enough, be upfront about it.

As it were, we acted that way with him because we couldn't believe that he'd use £200 of materials for the job, as we did a quick google to gauge an idea of the prices for the materials he said he'd be using and couldn't get anywhere near £200 for what was basically a bit of masking tape and some plastic sheets (for covering windows), along with a tin of exterior paint and a tin of exterior primer. There was no external wood to paint as it's all PVC (windows, soffits, fascias etc) so no undercoat/gloss needed. If he'd have quoted £100 for materials, we'd not have given it a second thought. But to make a £100 extra/hidden profit on buying £100 of materials is taking the piss!

We had a father-son team dig up & pave our back yard last year.
Took 3 weeks and I paid them every Friday.
Father wanted actual cash, son was happy with BACS.
I was warned though, and also had to pay cash upfront for some materials (others were credit card by phone) so DH made regular trips to the nearest ATM - 5 mins on foot - to get the daily max out so we always had enough.
Agree that - esp with current reductions in bank branches/hours - it would have been a massive pain initially if we hadn’t known! They definitely should let people know in advance.

It wasn’t about tax with ours either afaik - they charged £500 a week each, and no purchases, so well under the threshold for VAT registration - a nice simple life! (Obv there’ll be income tax but that must be pretty simple too at those rates)

Also just remembered the dad (the boss!) has an old Nokia brick, not a smartphone, so can’t check banking on the spot (& anyway spends a lot of time on a moorland smallholding with no signal!)

I doubt that's the case, giffgaff charges £8 a month for a generous data allowance (along with texts and calls). I only pay £11 with 02 and it would be enough to check my bank balance regularly (also some banks send you a notification when a payment goes in).

The bigger issue for me is that unless it's someone you've paid before, bank transfers are not an instant thing that take seconds, it takes forever, you need a card reader, they stop you at every screen to ask you if you're sure it's not fraud. Also some banks won't let you proceed if they can't match the account name and number (some banks aren't part of the system yet). It's almost easier to write a cheque! I do think they should have a card machine if they want instant payment.

I won't pay cash but that's more to do with being too lazy to go to the cash machine/bank to get some, than any moral issue.

Who waits until the end of the job to be paid

What sensible customer would pay upfront? For materials, yes, but I want to know the job has been done to my satisfaction before I pay the balance.

It won't go through the books. This is for avoiding not only personal tax, but also going over the VAT threshold. My husband is a gas engineer. He takes bank transfers and card payments and if someone offers to pay in cash he of course accepts it, but it isn't his go to.

I own a business and we provide a service.

We mainly work for other businesses but sometimes work for individuals. We are VAT registered and sometimes ask the individuals to pay cash to avoid the VAT.

Love this response.

As the wife of a contractor I have to say it works both ways. So many clients ask to pay cash all the time! We’re all above board and don’t accept cash. We’ve lost clients over it. When a contract is high value the VAT really pushes the price up significantly. It’s not just contractors that can be dodgy. Everyone likes a discount.

Thanks for your responses - I'm enjoying the sarcastic ones, and the sensible ones too. It's hard not to begrudge it when I'm a self employed person that spends hours a year inputting every small transaction and declaring it by the book.

A mix of avoiding income/corporation tax and avoiding the VAT threshold.

All the contractors I know, including myself, will do anything possible to avoid hitting the VAT threshold.

If you hit the threshold it makes accounting more difficult; and you have to charge your customers 20% VAT. You loose business to non VAT registered companies, and then have to unregistered the next year, then business picks up, you hit the threshold again, have to register and charge, loose business... and the cycle is endless.

Personally I pay all my tax as a sole trader (no Ltd company to avoid tax). The VAT threshold is the only thing I avoid. I do it by turning down work or pushing invoices into the next year. But others do it by taking part cash in hand

It's obvious - to avoid some tax, and to eliminate the risk of people not paying.

Everyone I know who's self-employed has had to go to small claims court or threaten it at least once due to customers not paying.

DH and I run a business, and get really pissed off with people who ask for a discount for cash. We still have to create a papertrail for their order, and we also get charged for paying it into the bloody bank which we have to drive miles to.

So when we get a quote from tradespeople at work and they ask for cash, we don't use them as we need to enter an invoice into our systems.

I once asked a fencer for a receipt. He agreed to do a job but only if he was paid in cash. It was £1400. I agreed to pay him in cash IF he supplied a receipt. Upon closer inspection of the receipt it was just a load of rubbish. It said "£1400 received as payment" then signed " A Fencer"

When I appoint a contractor, payment is just one of the issues we discuss and agree BEFORE they start work.

I explain that I pay on the nail, the day they finish the job to my satisfaction. Do they prefer cash or bank transfer? Their choice.