latest news

How to get money from late-paying customers as a freelancer?

When it comes to collecting money from your late-paying customers, it is not just incredibly frustrating it is also demoralising – and this is especially true for smaller businesses. Unfortunately, most businesses are likely to encounter this at some stage.

It is more damaging for freelancers too, regardless of how large and profitable their client list may be. These section of the business world is also much more likely to encounter late payers. The Freelancers Union says that 71% of freelance workers will struggle with late-paying clients at some point.

Some steps can be taken, however, to help you recover payments from late-paying customers.

  • Polite reminder emails

The first step that it is recommended you take when a customer’s payment is overdue, is to send a polite email to give them a gentle reminder. Perhaps the best moment to send a reminder is right after the due date, as in the next day.

An email template can help a great deal with this, prepared and ready and as polite and professional as possible. This template can then be personalised to each customer, as needed. 

Items that should be included are the date the payment was due, the payment methods that you accept. If any late payments fees may be included in your terms, gently remind of those too.

Of course, it is always a good idea to attach the original email also for reference.

Give them a call

If you do not have any success with reminder emails, then the next step needs to be simply giving them a call. Taking the reminders as inspiration, be polite and friendly. Ask the customer if there is a specific issue that has caused the payment prevention.

Try to work out a solution between yourselves – it could be a simple issue a payment not getting through for some reason. If possible, try and secure payment while you are over the telephone via a credit card. Failing that, get your client to agree to a specific payment date.

Stop work on their projects

If previous steps have met with resistance or just ignored emails, calls or payment is simply still not forthcoming, then stop work. Nobody is here to work for free and by stopping work until you are paid, the customer has added incentive.

By paying, their projects can continue and you are not wasting your time or losing more money because of an unreliable client.

Speak to a debt recovery agency

Getting outside help in collecting the money that you are owed can be a good way of getting back some, if not all, of the missed payment(s).

Using a collection agency can save you a lot of headaches and stress, knowing that professionals are on the case on your behalf. When customers have professional debt recovery officers at the door, they are much more likely to make payments.

Consider a small claims court

If the amount that you are owed is not too great (up to £10,000) then another option, if you prefer a court claim, making an application through the small claims court may be the option for you. Fees for small claims are relatively inexpensive, so they can be a cost-effective solution to your payment woes.

Another attractive feature of the small claims court is that you do not need legal representation, although it is certainly permitted if that’s what you want.

Protecting yourself in the future

In the future, to protect yourself, you may want to consider taking a couple of preventative action.

  • Take deposits
  • Ask for total payment before work starts

When requesting deposits, it is commonplace to ask for between 25% to 50% of the total fee before you begin work. Alternatively, if the amount that will come due, is not so large, then many smaller businesses will ask for full payment upfront – this is normal practice and nothing to be embarrassed about requesting after all this is normal procedure when ordering anything online.

To conclude

Late paying customers can be stressful, not to mention potentially damaging for your business. The advice and tips outlined here just might help you to get the money that you are owed, as well as help prevent loss in the future too.

How the pandemic has affected payment of invoices

According to latest estimates, around half of businesses in the UK and Ireland (as a part of a survey response) have said that the ongoing pandemic has affected payments. According to the estimates, approximately two-fifths of small to medium businesses have said that they are experiencing increased delays in invoice payments.

Cash flow, problems in sourcing additional working capital and late payments are the top three concerns among small to medium businesses are now reporting.

As the UK and Ireland continue to brace themselves against the full impact of the pandemic, the effects of which we are yet to fully appreciate, businesses are taking steps. The steps include measures to minimise any negative impact on their ability to continue trading and of course protect their cash-flow.

Invoice recovery

Unfortunately, there is an inevitably during challenging times that businesses will opt to withhold invoice payments. This, naturally, has a negative impact on all businesses connected with them. From other companies whose invoices will be paid late also, and from there, their ability to pay their own bills both at work and at home.

As more staff are forced into isolation, and unable to work from home, SMEs are finding it more difficult to reach their accounts departments and, from there, those responsible for paying invoices.

All of this together will have a negative and serious impact on supply chains, across England and Wales, as well elsewhere of course. Cash-flow problems for the worst affected companies are inevitable.

  • Getting your invoices paid in the middle of a pandemic

Even during ‘normal’ times, a massive 78% of companies admit to paying their invoices late. This can cause headaches for small to medium businesses at the best of times, but during a pandemic and the financial pressures that come with it, this can be a veritable nightmare.

There a few things that can be done, to help improve your chances of getting your invoices paid in the future. The most obvious step is increasing your payment deadlines. In the current climate that we find ourselves in, it can be important to be a little more considerate than perhaps is usual.

In the normal run of things, adding a late payment fee is commonplace but under the circumstances, it may be best to simply extend the deadline and forgo the fee.

This will do two things:

  • Allow your customer a little more time to pay, taking the pressure off of them
  • Maintain a friendly relationship

If late payment is unusual, and you have a dialogue with them, this is by far the better option. Another option is to offer incentives in order to encourage invoice payment.

When you are working with a slow-paying client, offering a discount for early or even on time invoice payment can wonders. However, you should be careful if going down this road and how you decide to structure the offer.

You certainly do not want to offer too much in a discount, this could have a negative impact on future discussions regarding pricing and payment.

Things can be mitigated

Debt recovery agencies are usually the last option, and plenty of time needs to be given to customers. Setting up reasonable pricing and payment structures, and making sure that customers understand them before work begins, is going to help you a lot later down the line.

Businesses are going to be hit, one way or the other, but with careful planning then they can avoid becoming a business casualty.