Even though the coronavirus pandemic may be over, the total amount of outstanding invoices owing to UK businesses has increased to an astounding £23.4 billion. In particular, freelancers in the UK are still waiting for an average payment of £2,000 for already completed work. Due in large part self employed and not been paid, a quarter of independent contractors reported in the same WondaPay poll that they were seriously considering giving up self-employment altogether.
1. THREE GIANT LATE PAYMENT PENALTIES
The constant need to pursue money you should have received causes freelancers all kinds of issues.
Time and money are being wasted. It disrupts the cash flow (impacting your ability to pay bills and meet day-to-day living costs). Additionally, it drains you. In fact, the sense of conflict it may foster, in my experience, frequently has a negative impact on the mental and emotional health of small business owners, particularly those who work alone.
However, it is evident that everyone has the right to be appropriately compensated for job performed in a good faith within the specified timeframe! It is impossible and undesirable to disregard persistent late and non-payment.
Being in this circumstance is not enjoyable. But how can independent contractors, business owners, and those who work for themselves go about getting the money they are owed? Here are my top ten recommendations.
2. SELECT YOUR BLAST
We do not support absolving someone of their obligation to make a payment. However, as a freelancer, you must consider when it makes sense to pursue an unpaid invoice and when to hold off. Prior to agreeing to help an indigent freelancer, we frequently remind clients that collecting unpaid invoices requires time and effort.
3. RECOGNIZE WHEN TO STOP.
As a freelancer, you run a significant risk of falling victim to the Sunk Cost Fallacy. At this point, we tend to believe that since we’ve already begun something, we need to work even harder to see it through to completion. The adage “throwing good money after bad” is well known.
So, freelancers, keep in mind that there is a cap on how much you should spend pursuing a debt. After that point, it stops being useful and merely makes the loss worse. After all, it wouldn’t take long to “pay” much more in missed time than you are trying to recover if your value to the company is £100 per hour.
4. GO FOR IT IN BUSINESS
The chance of recovering the debt given the nature of the debtor’s business is another consideration when considering whether to move forward or write off the debt. You could try every possible avenue and yet not get your money back if you think the client is having real financial problems.
You should also think about how you will interact with the client moving forward. Fighting over one minor invoice that they are disputing may not be the best line of action if they consistently send you a significant amount of work. By severing your ties with them, you can wind up losing a lot more in terms of potential earnings.
5. BE DIRECT, POSITIVE, AND FIRM AT THE OUTSET.
Chasing a debt doesn’t entail calling in debt collectors and filing lawsuits as soon as an invoice is past due! Nine out of ten times, one email will suffice to address a late payment.
The majority of late payments are brought on by the client’s poor administration rather than anything more sinister. A pleasant email reminding them that the predetermined payment period has passed frequently suffices to trigger their memory and prompt payment.
6. Prepare your terms.
This is when establishing and agreeing on clear payment terms before you started working for a customer truly comes into its own! A cordial email dialogue has begun.
It means you can easily and respectfully direct the client’s accounts staff to the contract you both agreed on. If you did it right, the contract will also specify when payments are due. Simply make sure that your terms are accessible and easily sendable.
7. ASSUMPTION OF ONE OF TWO EXCUSES
As we’ve said, if a client doesn’t pay an invoice on time, they’ll typically respond to a moderate prod. Sadly though, not all. Chasing a late payment might become stressful at this point.
The two most common types of persistent late or non-payment, or justifications for not paying you, are listed below. Either the client disputes the invoice or all of your efforts to collect the debt are met with a wall of silence. For instance, if the work wasn’t finished according to the agreed-upon standards.
8. ASSURING FREELANCERS ARE FINANCIALLY WORTH IT, KNOW WHEN TO ESCALATE
However, there is no use in calling the debtor continuously, describing potential courses of action, or sending emails. At some point, you must be ready to escalate rather than just discuss doing so. In our extensive expertise in helping the self-employed, it’s unlikely that sending another email will work if the invoice payment hasn’t arrived after three or four reminder attempts.
9. MAKE SURE YOUR FIRST PORT OF CALL IS CHOSEN.
Once you’ve determined that escalation is the only course of action, your initial step should be to refer the matter to a reputable, experienced debt recovery organization.
Be aware that in the small number of situations where a debt collector will fail, it will likely be time to consider your legal options, including hiring a lawyer to act on your behalf, filing a claim for the debt in the county courts, and, if necessary, taking action to enforce any judgment if it is not paid. But if you follow the instructions from earlier in this article, hopefully you can avoid both the debtor and yourself having to deal with legal wrangling.
