Being a freelancer has many advantages (especially compared to being a wage slave employee), but one big disadvantage.
And that’s the fact that you are your business: you have to do everything in it. Which includes chasing payments owed to you by clients.
That can be a little awkward at times. If you have an ongoing relationship with a client who regularly gives you work, you probably don’t want to be discussing a project in the morning and overdue invoices in the afternoon.
But it is essential to chase invoices and ensure you are paid on time. The reason most businesses go under is because they run out of cash (even profitable businesses will fail if the money runs out).
If you invoice someone and give them credit terms of 30 days – but they don’t pay on time – that’s your money, sat in their bank account! Your suppliers wouldn’t put up with you doing that to them.
Seeing as it’s likely that you don’t have a large lump of cash sat in your bank account to see you through, here are some tips to being paid on time without damaging any relationships with your clients.
Set clear expectations at the beginning
When you start a piece of work for a client, give them a written copy of your terms and conditions (a solicitor can prepare these for you). If you are doing ongoing work agree at what points you will be paid, and consider refusing to continue work on a project if a payment is late. You should state how you prefer clients to pay; for example a BACS bank account transfer means you will get your money more quickly. Also state how many days’ credit you will give them. 14, 28 or 30 days is normal. Be clear what will happen if they don’t pay on time. Legally you are entitled to charge interest on late payments.
Make invoices easy to pay
The easier it is for your client to pay an invoice, the faster you could get paid. List exactly what the invoice is for and break down anything that could be queried, slowing payment. Date the invoice and ensure you state the date it must be paid by. Also list your preferred payment method again, and don’t forget to give essential details such as account number and sort code for BACS payments, or the name the cheque should be made payable to. Consider printing and posting invoices rather than emailing them; it’s a good way of guaranteeing your invoice doesn’t get lost on email.
Be brutal with credit control
Most clients that are late paying are forgetful or inefficient rather than trying to pull a swift one. You’ll soon discover your clients’ attitude towards money owed when you remind them. The ones that are genuinely horrified and pay straight away are the honest ones! Send reminder letters or emails stating the amount owed and how overdue it is. Letters can be a little more “anonymous” than phone calls chasing money, and in the eyes of your client can help to distance you the supplier, from you the debt collector. Be aware however that phone calls often get faster results. A good trick is to find out the name of the person who actually processes payments for your clients and try to deal only with them for money matters, rather your day-to-day contact.
Be forthright about how important it is to be paid on time
You should always be honest with your clients and tell them how important it is that you are paid on time. It is accepted that as a freelancer you are a one man band and need money in the bank to put food on the table. The appeal of freelancers to businesses is that they can work out cheaper or provide better value than companies. So it’s only fair to ask for prompt payment! Whatever you do, don’t fall in the trap of holding back from chasing money that’s rightfully yours. This is business not personal and you need to approach it that way. So often a business with a lot of bills to pay will prioritise the people who are shouting the loudest!