It’s an unpleasant fact about contracting and freelancing: occasionally you may come across clients who either pay late or don’t pay at all. Sometimes this can be an innocent mistake, sometimes it can be a deliberate tactic on the part of the client to manage their business’s cash flow. Either way, it’s annoying for the self-employed who then have to dedicate time and energy to chasing up late or missing payments, which takes away from time spent on actual work projects.
Of course, chasing unpaid invoices is a delicate task. If you have a long-standing relationship with a client who has always paid on time previously and then suddenly, they don’t, you probably want to open a dialogue with them rather than jumping in with solicitor’s letters. And even where this is not the case, there is still a process to go down.
Our friends at Sage have written a great article and produced this handy animated infographic as a step-by-step guide for what you should do if an invoice goes overdue. It’s definitely one to bookmark.
Timing is everything
As you can see, there are specific times it’s advisable to wait before escalating things:
- Wait two days after your invoice is due before sending the first email
- Wait another seven days before sending a second email
- Then wait 24 hours before making the first phone call
- Give another seven days before the second phone call
- After another seven days send the first formal letter
- Then give them 14 days before sending your formal demand letter (either from yourself or a solicitor) invoking government legislation to charge interest on the overdue amount
- After this point, you would either go to a debt recovery agency, or use a solicitor to go down the route of mediation, statutory demand, or court action
Bearing in mind this is 38 days from your invoice becoming overdue to taking formal action, this can definitely seem like a long process, but remember that a lot of clients will pay after the first email is sent, assuming it’s a genuine mistake. Hopefully you will never have to go as far as using, for instance, a debt recovery agency.
To speed things up, Sage have included template emails and phone call scripts in their article so you don’t need to spend hours composing the perfect text or coming up with the right thing to say on the phone.
How to make sure you get paid
The best way to ensure you get paid on time is to have crystal clear invoices. As well as all of the obvious information (e.g. the date, your name, address, amount being invoiced for) make sure you include your payment terms and how to pay you, including relevant bank account details.
You could also add a note underneath saying that late payments will be subject to the Late Payment of Commercial Debts (Interest) Act 1998 so that clients can see that you understand your rights.
It’s also worth taking a look at our Legal Expenses policy which includes a debt recovery service for unpaid invoices over £500. take a look here.