What can I do if my client isn’t paying my invoice?
There is little more irritating to the self-employed than a client being late to pay an invoice or, well, just not paying. It can be incredibly frustrating, and even worrying – especially if you are depending on that payment in order to pay your bills. But what can you do to ensure you’re paid promptly?
The good news is, there are options open to you. Not all of them will guarantee that your client will pay you on time, but they will help you pave the way for them so that they have no excuses for not getting payment to you.
Agree payment terms early
This won’t help much if you’ve already started work for the client but, going forward, make sure payment terms, dates, and deadlines are clearly outlined in advance. This could even be a section in your contract, and it can be reiterated as small print on your invoices.
Part of your payment terms could include specifying a deposit to secure your services before work begins. This is a good move to make, especially with new clients as it gives you an indication that they are serious and won’t mess you about later. It also gives you some cash flow upfront so you’re not doing a lot of work without seeing any payment.
Keep on top of your invoices
Generally speaking, clients can’t pay you promptly if they don’t have your invoice in a timely manner. Larger clients, in particular, will have weekly or monthly cut-off dates for payment runs and if you miss them it will delay your invoice getting paid further. So, get in the habit of sending out invoices as soon as work is completed or as soon as you reach agreed milestones.
Keep tabs on what is due when and what has and hasn’t been paid so that you know as soon as a payment is late and a client needs a reminder. There are various accounting apps out there that can help you automate this process if you’re someone who’s liable to forget or not make the time.
Get a contact in accounts
When working with a medium-to-large client, it’s likely that invoices will be dealt with by the accounts team or a particular person within the organisation. Rather than invoicing your hiring manager and then waiting for them to pass your invoice on, get a contact within the accounts team and send your invoice directly to them. You can always copy in the hiring manager if they need to be in the loop. Doing it this way will usually mean your invoice gets dealt with right away, rather than sitting in an inbox for a couple of weeks before being passed on to accounts and missing that month’s payment run. It also means that if your payment is late, you can chase accounts directly, rather than going through a middle man.
Send a gentle reminder
We know it’s annoying when a payment is late and it can be tempting to go in all guns blazing to demand it’s paid right now. But bear in mind that it’s probably just an oversight. So your first contact should just be a polite reminder that payment is due and hasn’t been received yet. Most of the time, this resolves the situation and your payment will appear as if by magic. Occasionally, though, you won’t hear anything back. This is when you go in with a phone call to chase the payment up more directly.
Charge late fees
A lot of contractors get nervous about the idea of late fees but there is actually legislation in place that gives you a right to charge them on late commercial payments. This allows you to charge statutory interest of 8% plus the Bank of England base rate. You can also charge a fixed amount covering the cost of recovering the payment. This allows you to charge:
- £40 for debts up to £999.99
- £70 for debts between £1,000 and £9,999.99
- £100 for debts of £10,000 or more
When charging interest and a fixed fee, you should send out a new invoice, although it’s worth including information on your late fees in your contract and on your invoices.
Use a debt recovery service
If all else fails, you could reach out to a debt recovery firm to chase up the payment on your behalf. It’s important to note that they will charge a fee, so be sure that you have done absolutely everything you can yourself first.
Taking on financial risk is part and parcel of being self-employed and, unfortunately, late payment of invoices is a part of this. You can mitigate some of the financial risk that you carry by having appropriate business insurance to cover aspects such as public liability and professional indemnity, although you should also do your best to ensure clients pay on time so that you don’t find yourself stuck.