One of the worst parts of freelancing is chasing late payment of invoices.
There’s no accountancy team behind you, no one to take those uncomfortable conversations off your plate, and no one to ensure that robust processes and procedures are followed to avoid even more invoices slipping through the net.
There’s only you.
And with late payments having such a negative impact on freelancers, how do we arm ourselves with the tools and processes to support freelancers in getting paid on time, every time.
Paying freelancers
Late payments significantly affect freelancers and ultimately can make or break a person continuing in this position, especially as we note that most freelancers work on a job-to-job basis, i.e., invoice paid to invoice paid.
Reports also show that freelancers and small businesses spend, on average, more than one day per week per year chasing late payments, costing your business as you’re taking away from other areas that could be generating income.
This means, as a freelancer, you can’t afford to let every invoice slide into an invoice not paid.
So, what can you do, and what practices can you implement to ensure you avoid late invoice payment?
How to avoid late payment of invoices
Have robust payment processes
It’s vital that you continuously look to improve how you issue invoices (in a timely manner) and how you collect on late payment of invoices reducing the time it takes to get paid.
To help with some of these challenges, you could:
- Offer different ways for customers to pay
- Offer discounts if clients pay early
- Automate areas of your accounting.
Ask for full payment upfront
Ok, this is not always realistic, and instead of acquiring more work, you could lose more. So maybe, as a compromise, look to take a percentage deposit from the total bill upfront. This way, you can secure the work and generate a small income upfront.
Call your clients
As soon as an invoice becomes overdue, it’s important to contact your client.
The best way is often via phone call, as emails get lost in the never-ending inbox and can be forgotten as an answer is searched for.
Speak to the person you have been dealing with or ask to speak to the person responsible for paying the invoice. Make sure to have a structure for the conversation and ask questions to help you get to the bottom of any payment issues.
Keep the lines of communication open
If you have a client who is late with their payments every month, make sure to speak with them to see if there is a better way for both parties to work together. For example, when is their payment run? Do you issue invoices just after this date, hence the delay in payment?
Do they prefer paper-based invoices as digital gets lost or vice versa? What is their preferred method of communication?
What is in your contract?
And do you even have one?
A contract can be an invaluable document outlining the goods and services you are to provide by the agreed date, and when this happens, you will be paid a set fee by a set date.
Contracts are legally binding and provide you with a better standing if the issue progresses to court.
Look to issue late payment fees
Late payment fees included in contracts at the beginning are no longer taboo but are now very much common practice.
We understand that you don’t want to offend your clients or put them off working with you, but you also have to secure your work and make money.
Those clients who value you and your work should be more than happy to agree to include these fees in your payment terms.
Note: Late payment fees include interest at the statutory rate of 8% and a debt recovery fee if you are required to go down this route and use a professional collection team like Direct Route.
Know your rights
It’s important to know that as soon as your invoice becomes overdue, you can add a late fee to the invoice.
Late is defined as any date after the agreed term date stated on the invoice. If there is no date specified, legally, the term for payment is 30 days after the invoice has been issued.
Work with a professional debt collection team
We know that freelancers don’t always have time to spend chasing outstanding invoices, and we also understand that it’s not the easiest part of the job.
That’s why working with a professional team can help maintain good business relationships, ensure payment is received, and keep your accountancy practices running smoothly.
Paying Freelancers
As a freelancer, you will, no matter what sector you work in, encounter those that don’t pay.
However, it’s important to remember that being paid late is not okay. Not only is it detrimental to your business but also to your well-being.
As such, make sure to have clear contracts in place, introduce late payment fees, communicate with your clients, and set clear payment terms with due dates.
If you’re looking for additional support with late payment of invoices speak to Direct Route today and see how we can help you.