Sell the job, let someone else do it: how to keep track of subcontractors
One customer, one invoice, one payment, and a partner who needs their share. Here is how it fits together without the money getting mixed up.
Many companies sell more than they can deliver themselves. The solution is subcontractors, and the problem is rarely the work, but the money.
The simple model
The customer buys from you. You invoice the customer for the whole job. You buy the execution from a subcontractor, who invoices you. Your margin is the difference. The customer has one contracting party; the subcontractor has one place to send their invoice.
What must be agreed in advance
- The price to the subcontractor, a fixed amount or a percentage of the customer's price. Write it down before the work starts.
- Who is liable for defects. Towards the customer it is you. Back towards the subcontractor it depends on your agreement.
- When the subcontractor gets paid. When the customer has paid, or when the work is delivered? The first protects your liquidity; the second is fairer to the partner. Choose, and say so.
- VAT. The subcontractor invoices you with VAT, you deduct it and add VAT on the full amount to the customer. Nobody pays VAT "twice".
What goes wrong
- The customer's payment and the subcontractor's invoice sit in separate piles, and nobody can see whether a job made a profit.
- The subcontractor is paid before the customer has paid, and the customer never pays.
- The agreement was verbal, and the two remember it differently.
What LegaSum does
In LegaSum the job is created with customer, price and any subcontractor with the agreed settlement. The invoice to the customer comes from the job; when the customer pays, LegaSum knows what the partner is owed, and settlement happens as agreed, not before. Every job shows what came in, what went out and what was left.