Do you have an overdue invoice that you don’t know how to chase? Have a read here about how to get the money that is owed to you!
£5431.03. Nope, that’s not the size of a millennial’s overdraft or the price of a Caribbean cruise-but the amount of money that IPSE estimates the average freelancer is owed. With more of us freelancing than ever before, overdue invoices are only set to become more and more common.
In fact, it’s thought only 51% of invoices we submit are actually paid on time, leaving us spending hours each month awkwardly chasing the remainder. But what can be done? What are the next steps if your politely worded emails of desperation just aren’t getting you anywhere? We reveal everything you need to know about getting yourself paid on time.
Set Your Terms and Conditions From The Beginning
Okay, it’s too late to do it this time around, but an important reminder that every freelancer should have their own terms and conditions to share before beginning a project.
Establishing T&Cs means you can set out your payment terms explicitly (make sure to include information on when payment should be made; your procedure for late payments; arrangements for overtime and the specific tasks you are being contracted for). If taking on a large project, it’s well worth building a deposit into your terms to help resolve some of the stress. If you don’t know where to begin, don’t fret: there’s plenty of easy templates to follow such as this one.
When late really means late
In our imagination we’ve spent the money the moment we sent the invoice, but when does late actually mean… well late? it depends. If you’ve had the good sense to build these into your terms and conditions the moment it moves past that window, it becomes ‘late.’
However, if you haven’t set any terms at all (and let’s be honest, sometimes as freelancers we’re so excited to get work that we neglect to), you automatically revert to the Government guidelines. In that case, your invoice is deemed late thirty days after you sent it.
If you’re already there, then there’s some good news. As soon as your invoice is late, you can start charging late fees. These consist of a debt recovery fee (between £40 to £100 depending on the value of your invoice. More info here.) and 8% interest for every day the invoice is overdue.
It’s the law that you are entitled to charge these fees so the first step should be to remind the company that the payment is overdue and then submit an invoice with the added late payment costs.
Bring in the Big Guns
If you’ve already wasted hours trying to get invoices resolved, it can be easy to just accept defeat. However, before you go down the legal route (more on that in a moment), there are some services that can take on the burden of invoice chasing on your behalf.
These tend to come under two categories: invoice chasing services (who chase your invoice in return for a flat fee or a percentage) or invoice financing (who pay your invoice immediately-with, of course, a cut-and then dedicate their time to getting the invoice paid for themselves.)
There’s quite a few options on the market now: Paysap offer invoice chasing and invoice financing whilst freelance insurance specialist Get Dinghy will chase invoices over £200 as part of their standard insurance policy. Crunch.co.uk is a cost-effective choice as they only take a 5% cut and nothing upfront.
Time for court?
Finally, if late payment and chasing it is getting you nowhere, it could be time to take things further. Many of us find the concept of small claims court off putting, but it’s actually incredibly simple (and, if the case is straightforward enough, you won’t need to step in front of a judge). If you’re owed under £10,000, you can now make a money claim online via a Government portal with fees starting from just £25 (and rising depending on how much you’re owed). With the online system being easier than ever to use, it’s certainly worth pursuing.
Another quick tip: since you don’t need to pay until you press submit, it could be worth screenshotting your claim form and sending it to your debtor to show you mean business.
What can you do to protect yourself in the future?
We all promise ourselves to never work with people who won’t pay us upfront, but more often than not, we are lured back in. Freelancing is notoriously insecure and sometimes we need to take whatever’s offered to us. It could be worth investing in business insurance that offers an invoice chasing service in the future or even a specific non-payment insurance such as Tradelock.
As mentioned at the start of the article, setting out your T&Cs clearly both upfront and in your invoice can help-make sure you reference the government late fees in your documents as a reminder too!
Late payments are just one of the many drawbacks of being self-employed (don’t get us started on lack of sick pay or the fact we can never quite switch off) but hopefully this guide has shown that there are steps that can be taken to ensure you get what you’re owed.