Not getting paid on time is stressful. Late payments negatively affect your cash flow, and you can spend more time chasing outstanding invoices than working on the business.
Trust us, it can be incredibly draining and time consuming.
As debt collection services specialists, we know the importance of nurturing relationships, especially for small- to medium-sized businesses and freelancers.
The good news is that most late payments are one-offs, and we can take the appropriate steps to reduce these; however, what about those who are persistently late or, worse, those who are deliberately avoiding paying?
Freelance Client Red Flags
Unwillingness to sign a contract
Contracts offer legal protection to both parties when they enter into a working relationship.
If one party is unwilling to sign a contract and appears to have numerous excuses as to why, i.e., it’s unnecessary red tape, they don’t have time to sign a contract, etc, this should highlight a big red flag.
Strange requests when negotiating
This can be anything from negotiating (or not liking) the introduction of late payment fees to trying to negotiate you down to a rock-bottom price. Or maybe they don’t respect your time as they set unrealistic time requests?
If this is the case, it might be time to walk away as the client doesn’t appreciate the value you bring.
Lack of communication
Is the client more than a little reluctant to commit to contract terms? Do they take a long time to reply to emails and phone calls? Do they appear not to want to build any sort of rapport or business relationship with you? Were they unresponsive the minute you sent an invoice?
Have they failed to communicate their expectations, so you’re unsure what it is you’re delivering?
Lack of communication between you and your client, especially at the beginning of the business relationship, should pose a big red flag.
Unprofessional setup
A freelance client’s red flag should start as soon as you notice that their email address is a little suspect. Other areas of professional setup can include not having an accounts payable department or anyone to manage invoices and payments when they’re issued.
This can pose a big problem, as where or who do you send your invoice to, and who is responsible for making the payment? Will they use this as an excuse for late payment?
Bad Reputation
Companies have reported online a bad service from the freelance client; their ratings and reviews don’t seem quite right, or maybe you’ve heard rumours about the client on the grapevine.
Reputation is everything, and reviews from others can indicate red flags.
The client persistently pays late
What is the reason for the customer not paying? Are they facing cash flow problems?
Claiming invoices are going missing? Are they waiting to get paid, so are they delaying payment to you as a result? Do they only pay some of the invoices but not the full amount?
It’s essential that you investigate those excuses and get to the root cause of late payment.
From here, you will then be able to apply the best and most appropriate credit control processes.
Personal issues can make an impact
As we all know, life can sometimes get in the way of work, and freelancers suffer these challenges two-fold as there is no one else to pick up the pieces and pay the invoices in their absence.
This does make contact more challenging, and the situation will require handling with care and professionalism.
There’s a shakeup in your customer’s industry
Being aware of your client’s industry can help you predict the chances of late payments occurring, as changes can affect their income and, in turn, their ability to pay you.
We advise knowing your customer and conducting background research and those all-important credit checks.
To find out more about the difference between solvent and insolvent, check out our most recent post HERE.
Commercial Debt Recovery Process
It’s important that you understand and know the warning signs mentioned above to know when to take action.
The action you take will depend on the information you have; however, putting in place a series of robust credit control procedures that you can turn to can help improve and provide confidence to your accounts receivable department.
There is always risk in business, and with the increase of late payments costing businesses and the economy thousands, it’s essential to take the right steps to reduce this.
Our tips:
- Agree and sign a contract
- Take a deposit
- Agree to milestone payments
- If something doesn’t feel right, walk away and go with your gut
- Find out the real reason for late payment
- Limit payment terms/reduce credit limit
- Work with a professional debt collection agency.
Our team of professionals has years of experience working with companies struggling with late payments.
To see how we can help you, contact us today.