Flaky clients – a step by step guide to dealing with late payments

Dealing with late payments – part two

As a contractor or freelancer, one of your main gripes will probably be late payments from clients. They promise to adhere to your payment terms and conditions, you complete the contract on time and then payment never seems to arrive when expected…

 

In last week’s blog we explored the steps you can take to prevent late payments and how to ensure your client is aware of your payment terms. In this blog we take a look at what you can do if you happen to find yourself dealing with a late paying client.

 

What to do if your client doesn’t pay on time:

 

1. Frustrating? Yes, but remember to keep your cool. Firstly, send a polite, straightforward reminder. Tell them you expect payment within 7 days and ask them to give you a date on which you can expect to receive it.

 

2. Phoning the client may mean you get paid more quickly. Whatever excuse the client gives (lost in spam folder, accidentally deleted etc), sympathise with them, as the excuse may be genuine. It’s not worth losing your professional reputation over. Calmly remind them of the due amount and ask them when payment will be made.

 

3. Keep a record of any expenses you’re incurring as a result of the delayed payments and share it with the client, so that they’re aware of any penalties accruing.

 

4. If there is a legitimate reason for non-payment, you may consider arranging payment in instalments. Depending on your circumstances, this could be better for you than no payment at all.

 

5. If your first reminder hasn’t had the desired effect, it’s time for another. State that it’s your second reminder, how much you’re due and how many days late the payment is. Make it clear when you expect to hear from them with a resolution and if you have included a late payment clause in your contract, remind them of it. If this clause has begun to rack up a charge, let them know the running total.

 

6. The Late Payment of Commercial Debt (Interest) Act (1988) was amended in 2002 to include fixed penalties in addition to interest. Make it clear that you will enforce this if an account becomes overdue.

 

7. If it’s looking like you’re going to lose out, your contractor insurance provider should be able to advise you on what to do.

 

8. If you believe there’s no hope of payment, you can get a solicitor or online debt recovery firm to issue a “letter before action” which threatens (politely!) to commence wind up proceedings if payment is not received in X days. This should cost under £10.

 

9. See the GOV.UK guide to late payment legislation for useful information on your options if you’re owed money.

 

And what NOT to do!

But before you do, read the following 6 steps, to help you keep your temper.

 

1. Don’t lose your cool! Remain professional however annoyed you feel
2. Do not vent your anger on social media – it could really damage your professional reputation

3. Never threaten the client

4. Ensure communication between both parties doesn’t break down

5. Don’t agree to more work with them unless payment has been made

6. And most importantly! Never lose your passion for contracting – don’t let one bad client put you off

 

If you follow these guidelines, especially those in part one regarding preventing late payments, you should not have to deal with too many non-payment situations but, if you do, we hope you now have the tools to deal with them confidently.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Flaky clients – a step by step guide to dealing with late payments

Dealing with flaky clients – part one

 

Sadly, late payment is something which every contractor and freelancer will probably have to deal with at some point. Whilst it can be considered the nature of the beast, it’s not something which you as a professional should expect nor have to put up with.

 

This blog examines the steps you can take to prevent late payments. Keep an eye out for our next blog that explores how you should deal with them if a late payment occurs.

 

Prevention is better than cure – our top tips for helping to prevent late payments:

1. At the contract signing stage, ensure your payment terms are clearly stated.

2. If you’re dealing with a new client, you could offer a discount if the client pays in full and in advance. Alternatively, you might incentivise your client by offering an early payment discount, within X days of invoice.

3. As soon as the contract is finished, send your invoice promptly. State clearly the payment due date. A shorter billing cycle of 14 or 21 days means it’s not so easy to forget to pay. The date the invoice was issued should also be included as well as the methods of payment.

4. It’s advisable to introduce a late payment clause into the contract (eg 1.5% per month after the due date), and ensure the client is aware of it, both at the point of signing the contract and when you issue your invoice.

5. Include “dispute resolution” terms in your contract, including an “arbitration clause” giving the name of the mediation organisation to be used in the event of disputes. There may be a fee for mediation (based on the amount owed) but it will be less than taking a client to court, plus it’s usually quicker.

6. If payment on a contract is in stages, ensure you’re paid after the completion of each stage. Don’t start the next stage without prior payment.

7. Check their payment history. A quick Google search will reveal if there are any disgruntled contractors who found payment an issue from your prospective client. It’s then up to you if you wish to continue with the contract, or include some late payment clauses to protect yourself.

8. As a contractor or freelancer, time means money so using a time tracking/invoicing app would be beneficial and could improve efficiency. Set up automatic reminders. The longer you wait to remind clients about an invoice, the harder it’s going to be to collect on it.

9. When you send out each invoice, it’s good practice to add a note thanking the client for using your services. Let them know you appreciate their business and hope they will use you in the future. You can also say you would welcome a testimonial from them and add a link to an email address setup for this purpose.

10. The invoice itself should look smart and professional and include the following:

 

  • All of your information
  • Your logo
  • Your customer’s contact information – name, address, phone and email address should you need to contact them in future
  • A detailed list of the items you are actually invoicing for. This could avoid conflict later on
  • Your payment terms – date due and late payment penalties
  • Any early payment discounts you offer
  • A list of acceptable forms of payment
  • Ensure you send the invoice to the correct contact and department, to avoid unnecessary delays

 

We hope that you are now comfortable with invoicing and discussing payment terms with your clients. Remember that an ounce of prevention is worth a pound of cure! In part 2, we will address what you can do if a client misses a payment deadline, so keep an eye out for next week’s blog.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.