Having worked as freelancers for many years, we've had our fair share of late payments to deal with. Even though we always recommend that you have your clients pay you in advance, it's always a tricky one to handle when a client doesn't pay your invoice on time.
With over 500 freelance social media marketers in our membership, The Inner Hub®, we've heard many horror stories about late payments. That’s why we invited Jemma Crouch, from the debt recovery agency Control Account, onto the podcast to discuss how to get your invoices paid on time.
She shared her experience and expertise to help you to avoid late payments and to make sure that you understand what to do when the worst comes to the worst.
In this episode, we discuss:
- How to avoid late payments from clients
- Exactly what your invoice should say so your clients pay on time
- When to take action, who to contact and what to say if a payment is overdue
- Why taking legal action might not always be the best route
Jemma is the sales and marketing director of Control Account, a leading debt recovery firm that has been operating for over 40 years. They work with everyone from big brands to SMEs to non-profits to solo business owners & freelancers.
Although they offer many different services, debt recovery is a key service that most people hire them for.
How to avoid clients who don’t pay their invoices on time (or at all)
There are a lot of things that can be done to prevent your invoice from becoming overdue in the first place.
#1 Conduct Credit Checks
If you’re a freelancer taking on any type of client, you should be credit referencing them before you agree to work with them. This is something that most big companies do before they take on a client to make sure that they’re able to pay. Unfortunately, smaller companies and freelancers don’t often think about this.
When you give somebody an invoice and allow them a certain amount of time to pay, you are essentially giving them credit. Because of this, it’s important that you check beforehand whether or not they are able to pay that invoice.
These are all paid platforms but if you’re looking for a free alternative, you can use Companies House. However, you will need to do a bit more digging for the information yourself.
When you’re conducting your credit referencing check, you need to be looking into the financials. Ask questions like:
- What's their turnover?
- How long, on average, does it take them to pay their invoices?
- How stable is that business?
This will allow you to determine whether they’re a good company to work with, or whether they may cause issues.
#2: Put your payment terms in your Terms & Conditions
Freelancers, or any business for that matter, should always have solid terms and conditions. And within those terms and conditions, your payment terms should be clearly outlined so that they’re non-negotiable.
A great thing to include within these terms is what happens if your client pays late.
All businesses within the UK can apply something called Statutory Late Payment (from the Late Payment Act). This enables businesses to apply a percentage over the Bank of England base rate to any overdue invoices.
This is a government initiative that you don't need to have agreed upon upfront. However, having that in your terms and conditions says to your clients that you’re serious and they know from the start that if they’re late on their payments then they’ll have to pay the interest.
If you don’t have your terms and conditions in place, go to thetwolauras.com/legal and use the code LAURAS to get 10% off any Lucy Legal template.
How to get your invoices paid on time
#1 Have a conversation with your client
After you finish each job, ask your client whether everything was okay (and preferably, get it in writing). When you take the time to do this, it prevents any disputes further down the line.
Disputes typically arise when you deliver late, or the client doesn’t believe that you made the brief. Simply having that conversation as soon as you've completed the work allows you to iron out any issues that may be there before it goes any further.
#2 Invoice your client as soon as you’ve done the work, or (preferably) in advance
Invoice your client as soon as a job is complete. This way, it’s fresh in their minds.
If you choose to invoice at the end of each month, or the start of each month, make sure you’re prompt. Your client needs to know exactly when to expect their invoice, so make sure this is clear.
We always recommend that freelancers charge in advance to avoid these issues.
#3 Include the right information on your invoice
Control Account see a lot of invoices that are missing vital information that can often lead to people not getting paid.
Your invoice should always include the following:
- Your business name
- Your address
- Your contact information
- The word invoice (yes, it has to have this to be considered an invoice)
- An invoice number
- A reference number
- Your clients' reference number
- The date of the invoice
- The invoice due date
- How you want to be paid (bank details or a payment link)
- A description of the services
- The agreed-upon amount for the service
- Your payment terms within the footer (i.e. must be paid within 7 days)
Your clients are not going to go and fish for missing information, they’re going to wait until you chase them and then raise the issue. So make sure it’s all there to start with!
#4 Remind your client to pay their invoice
It’s always good to send your client a reminder about any upcoming invoices. You can invoice your client 7 days before their invoice is due with something along the lines of: “FYI, your invoice is due in seven days. Let us know if you have all the details”
When the due date comes and they have yet to make the payment, send them another email that tells them: “Your invoice is due today. I know you’re busy, but if you could find some time to look over it we’d appreciate payment by the end of the day”.
There are a lot of invoicing and client management softwares that will automatically do this for you!
What to do if your invoices still aren’t being paid on time & when to get expert help
If you’ve done everything right and your client still isn’t paying your invoices on time, there are a few things you can do to get them to pay.
#1 Have a phone conversation with your late-paying client
If, after one week, that invoice still hasn’t been paid, it may be time to move those conversations away from email and actually pick up the phone. People find it harder to evade these conversations if they're on the end of the phone.
Having a telephone conversation also makes the person on the other end realise that they’re talking to another person. When you tell them that you’re a freelancer and you can’t wait for months to be paid, there’s that element of guilt that creeps up and this is a lot easier to get across on a phone call.
Phone calls might be scary, but they’re effective!
#2 Keep your communication polite & respectful, but firm
The most important thing to remember is to keep the conversation polite and respectful. Be clear that you’re a small business, who requires prompt payment, and kindly request that your invoice is paid as soon as possible.
It’s very common for companies to put invoices on a payment run. If you’re told this, you need to ask them about specific dates. When is that payment run? Exactly what date can you expect to be paid?
You’d be surprised at the number of people who come to Control Account having not engaged in conversations with the people that owe them money because they didn’t want to upset them. While it’s completely natural to feel this way, you have to remember that you have entered into a business relationship. And the business is that you do what you’re hired to do, and then you’re paid for that work. It doesn’t have to be awkward.
Should you seek legal help if your client isn’t paying their invoices?
At this point, a lot of businesses that are still having trouble getting their invoice paid would go to a solicitor and ask them to send a legal letter.
The problem with this is that it immediately starts accruing costs, and you can very quickly find yourself accumulating court costs and solicitor fees. A lot of the time, this will be for something that isn’t even viable for recovery, either because there’s a dispute on it or because you didn’t do your due diligence on the company right at the start and find that this company has a lot of county court judgements and high court rates for unpaid invoices. This is when you’ll find yourself at the back of a very, very long queue while still paying for all the legal support.
Why you should hire a debt recovery company
The best way to recover your unpaid invoices is to engage with an ethical and professional debt recovery firm.
A debt recovery firm, like Control Account, can then send them up to three letters, supported by outbound telephone calls and SMS messages.
Usually, once you’ve engaged in a third-party debt recovery firm, that’s enough to send a clear signal to your customer that you’re no longer messing around and that you require prompt payment.
When you hire a debt recovery firm, they have the skills to negotiate those payments. As a freelancer, you should be focusing on your core job. It’s not your job to spend four hours of your day chasing invoices when you don’t have the skills in place to know what to say, where you stand legally and to talk about additional charges and interest rates.
At this point, it’s much better that you go to an expert; and this doesn’t have to be expensive. Most good debt recovery companies will work on a no-collection, no-fee basis. They will do all the work to recover the unpaid amount, and then take an agreed-upon percentage to cover the costs.
There are no hidden charges, no added interest and no cost for lettering. Just a one-off commission rate that you pay once your invoice has been collected.
Thinking about hiring a debt recovery firm? Here's some FAQ's
What is the minimum amount of outstanding debt that I can hire Control Account for?
The minimum invoice value Control Account takes is £25.
One of the biggest misconceptions about hiring a debt recovery firm is that it has to be a lot of money, but at the end of the day: money is money. If you’re owed as little as £25, or as much as £25,000, Control Account will take care of that unpaid invoice for you.
Is there a minimum term when working with a debt recovery agency?
Control Account don’t tie people in. There’s no contract and no minimum volume required.
You may start off referring quite a lot of unpaid invoices within the first few months, But after working with Control Account, you are sending a very clear message to your clients that your business does not accept late payments and that there are consequences to this.
After this, Control Account will be happy if they don’t hear from you again as it means you’ve got your ducks in a row and they’ve done their job as a company.
Should I continue working with a client, who’s been late on their payments, whilst waiting for that payment? Or should I put everything on hold until the invoice is paid?
This depends on a case-by-case basis. Any good agency would be able to advise you on this once they know the situation.
There’s often no harm in continuing to work with the client, but perhaps suggesting that until the invoice is paid, they pay ahead, or they pay 50% upfront. But it really depends on the background and why they’re late on paying their invoice in the first place.
All kinds of reports are indicating that 2023 is going to be a tough year. Everyone is feeling the pinch after COVID and the economic situation. Some businesses are going to get through it, but inevitably, some businesses sadly won’t.
Top takeaways from the podcast:
- Do your due diligence and use credit referencing platforms to find out more information about potential clients before you agree to work with them.
- Be clear about your payment terms within your terms and conditions.
- Invoice as soon as the project is complete.
- Don’t be afraid to call the client if your invoice is late.
- Hire a debt recovery company, like Control Account, to expertly handle the situation