Is there anything more annoying than having to chase a client for an invoice? You’ve done the work, sent the invoice 30 days ago and now you’re waiting for payment that’s over a week over due. Familiar story? Well, Monday 12th February marks the start of the most stressful week of the year for the UK’s army of freelancers, according to a study by invoice finance experts Access Commercial Finance. It’s all to do with unpaid invoices stacking up and businesses using the Christmas break as an excuse for paying late.
Dealing with late payments is tricky. On the one hand you need to push for prompt payment as overdue invoices can be detrimental to your business – time spent chasing could be better spent working on other projects and growing your business. Plus it has a knock on effect – now you can’t pay your suppliers or employees on time. But, on the other hand, you want to be on their good side and continue doing business with them. A fine – and bank – balancing act, indeed.
If you’re a freelancer or running a small business then you’ll know all about the pain of chasing for invoices. So here are 5 IDEAL things to do when a client doesn’t pay your invoices.
DROP THEM A FRIENDLY CALL
The first thing you should do is simple; just talk to them. It may be something completely innocent, like the person who deals with invoices is ill or away. You don’t want to get on bad terms with your clients without good reason, as you need them to keep your business running. Give them a casual call and ask about how their business is going, then mention that they are yet to pay their invoice this month. Make sure you have all the correct information in front of you to avoid confusion. If you’re seeing them soon, you could bring it up during you meeting instead, as face-to-face communication is not only more respectful, but it also garners more honest results.
FOLLOW UP
The next step would be to shoot a casual email reminder over to your client – it’s always good to have something in writing. If they still don’t pay up, write them a letter stating the figure that they owe and if they don’t pay it within a certain number of days, you’ll charge the statutory interest (which is 8%) plus the Bank of England base rate for business-to-business transactions. If they still don’t pay, threaten legal action. If you choose to go down the more formal route be prepared to follow through.
CONSIDER MEDIATION
Are they completely ignoring you? Then it’s time to consider mediation. This involves you paying a company to act as a conciliator between you and your client. If they also choose to ignore this stage and the case is taken to court, it will be taken into account in court as it shows that you’re taking this seriously and professionally. Before taking your client to court, there are two precautionary steps you need to take. The first is a letter before action or LBA. This is where you contact your solicitor and they talk to your client warning them that you are going to take them to court. This works well if the client is ignoring you to save money, as taking it to court could cost them a lot more. The second is getting a debt collection agency like HJS Solutions who will get back the money owed in exchange for a fee up front and a percentage of the debt recovered.
COURT ACTION
The final stage is court action. Depending on the size of the debt owed, the case will likely be taken to small claims court. The client will have to pay more as they will have to get their solicitors involved and if you win the case, they’ll generally have to pay for your legal fees, interest and more too, depending on the judge and jury’s final decision on the case. If they ignore your summons after 28 days, the court will then decide without a hearing.