How to pay a local business safely

Paying for work is usually the simplest part of a job. But it's also where a small mistake can be costly, whether that's paying too much too early, losing track of what's been paid or sending money to a scammer who has slipped into an email thread. This guide covers the habits that keep payments safe.

Pay against paperwork

Every payment should relate to something written down: a quote, a contract, a variation or an invoice. A proper invoice usually shows:

• the business name and ABN;
• the date and an invoice number;
• a description of the work or stage being billed;
• the amount, and whether GST is included;
• how to pay.

You can check the ABN with the free ABN Lookup tool (see checking an ABN). If GST is added, the business should be registered for GST, which ABN Lookup also shows.

Choose a payment method that leaves a record

Bank transfers, card payments and other electronic methods create a record you can rely on later. Cash leaves very little. If you pay cash, ask for a written receipt with the business name, ABN, amount and date.

Card payments may also give you options through your card provider if something goes wrong, depending on the circumstances. Ask your bank or card provider about this.

Don't pay too far ahead

The timing of payments matters as much as the method. As a rule, avoid paying well ahead of the work done. In NSW, the government says the deposit for residential building work can't exceed 10% of the contract price, and for building work over $20,000 it advises not paying anything until you have the certificate of home building compensation cover. Other states have their own rules.

For staged jobs, link each payment to a completed stage and check the stage is done before paying. Our guide to contracts and deposits explains more.

The invoice scam to know about

Scamwatch, run by the National Anti-Scam Centre, warns about business email compromise scams. In these, a scammer either hacks into a business's or customer's email account or creates a lookalike address, then sends a convincing invoice or message saying the bank details have changed. The work is real, the amount looks right and the email may sit in a genuine thread, but the money goes to the scammer.

These scams can hit anyone paying invoices, including households paying a builder, landscaper or other tradesperson.

How to protect yourself

• Agree bank details early, ideally in person or in the written contract.
• Treat any change of bank details as suspicious, however routine it sounds.
• Phone the business to confirm, using a number from its official website, your contract or an earlier invoice, never a number in the email asking for payment.
• Look closely at email addresses. Lookalike addresses can differ by a single character.
• Be wary of urgency, such as "pay today or we lose the materials booking".
• Consider a small test payment to new details, confirmed by phone, before sending a large amount.

If you think you've paid a scammer

Scamwatch advises contacting your bank immediately. The sooner you act, the better the chance of stopping or recovering the payment. Then:

1. tell the genuine business, so it can secure its email and warn other customers;
2. report the scam through Scamwatch's reporting tool;
3. consider reporting to the police;
4. change your own email password and turn on multi-factor authentication if your account may be affected.

Keep a payment log

On a bigger job, keep a simple log: date, amount, what it was for and how you paid. Match it against invoices and the contract. It makes the final invoice easy to check and helps if there's ever a disagreement.

Final payments

Before making the last payment, walk through the work with the business. Make a list of anything unfinished or not up to standard and agree how and when it will be fixed. For licensed work, ask for any compliance certificates. Pay once you're satisfied, or agree in writing what will be held back until the remaining items are done.

If you're asked to pay in unusual ways

Be cautious of requests to pay by gift cards, cryptocurrency, money transfer services to individuals or into an account in a different name from the business. These are uncommon for genuine local businesses and are often features of scams.

For businesses: protect your customers

If you run a business, you can help your customers avoid invoice scams:

• put your bank details in your contract and tell customers they won't change;
• tell customers to call you before paying if they ever receive new details;
• secure your email with strong passwords and multi-factor authentication;
• show your ABN and contact details clearly on every invoice.

Other payment scams to know about

Business email compromise isn't the only payment risk. Watch out for:

• Fake tradespeople who take a deposit and never return. Checking the ABN and licence, and keeping the deposit small, reduces this risk.
• Impersonation of a real business. Scammers may copy a genuine business's name, logo and even ABN. Contact the business using details you find yourself, not the details in an unexpected message.
• Overpayment tricks, where someone "accidentally" overpays and asks you to refund the difference. This is more common when you're selling, but it's worth knowing.
• Urgent requests from someone claiming to be a supplier, asking you to pay for materials directly into an unfamiliar account.

The common thread is pressure and unfamiliar payment details. Slowing down and checking by phone defeats most of these scams.

Receipts and records

Ask for a receipt or tax invoice for every payment, and keep it with the quote and contract. Records help if there's a dispute, if you need to make a warranty or insurance claim, and if you sell the property later and a buyer asks about work done. A photo of each receipt in a folder on your phone is often enough.

What to do if the business disputes a payment

If the business says it hasn't received a payment you made, check your bank records first and confirm the account details you used. If you paid the correct account, send the business your payment confirmation. If you discover you paid a different account, contact your bank straight away; it may be a scam.

Paying for materials

Sometimes a business will ask you to pay for materials upfront, particularly for custom items such as joinery or windows. This can be legitimate, but it is still a payment ahead of the work. Ask for the supplier's invoice, check that the amount fits within your state's deposit rules for the type of work, and consider paying the supplier directly if that suits both sides. Make sure the contract records what you've paid for and who owns the materials if the job doesn't go ahead.

Teaching the family

If someone else in your household also pays bills or deals with tradespeople, make sure they know the key rule: never act on new bank details without a phone check. Scammers often target whoever happens to be handling the invoices that week.

Key points

• Pay against a quote, contract or invoice, and use a method that leaves a record.
• Avoid paying far ahead of the work; NSW caps home building deposits at 10%.
• Treat any change of bank details as suspicious and confirm by phone with a number you already have.
• If you've paid a scammer, contact your bank immediately, then report it.
• Keep a payment log and check the work before the final payment.