Chief account Emily Coltman offers essential advice to freelancers on getting paid without delay
BIO: EMILY COLTMAN FCA | Chief accountant to Freeagent | freeagent.com
By the very nature of their work web developers have to be extremely flexible but at the same time adhere to strict deadlines. However, new research reveals that their clients are, by contrast, typically tardy when it comes to paying for their services.
Data from FreeAgent reveals that 97 per cent of UK developers have dealt with late payments from clients, with nearly two thirds (59 per cent) waiting three months or more to finally be paid. Almost one in five (19 per cent) said they wrote off an unpaid debt worth £1,000 or more for work they had completed. Don’t panic, there is light at the end of the tunnel. There are steps that can be taken to remedy that right now.
Getting your details correct is imperative. Make sure you include the right name for your customer, both their individual name and their business name, on your invoice (this is especially important if your customer has more than one business and you have to pick the correct one). Addressing your invoice to the wrong name or business might mean your customer has to ask you for a new invoice – this is time-consuming for both parties and will delay your payment.
“Almost one in five (19 per cent) said they wrote off an unpaid debt worth £1,000 or more for work they had completed”
Also, try to make sure your client can clearly identify what it is that you’re invoicing them for by including an exact and clear description that leaves no room for ambiguity or interpretation. This is particularly important if your client is a larger company, who may be dealing with dozens, or even hundreds, of invoices at a time. If you don’t make it clear exactly what they’re being asked to pay for, they may query your invoice, which could prolong your payment time.
One of the fundamental basics of invoicing is making sure you include the correct price for the work you’re charging for, but you’d be surprised just how many small businesses forget to do this! If a customer has to query the amount on an invoice, that’s potentially another delay to your payment.
Make sure you double-check the price quoted on your invoice before sending it to your client and if you’ve recently changed your prices, make sure you use the latest ones, unless you have agreed with your customer to use the historic prices. If you promised your customer a discount, don’t forget to include that on your invoice too.
Getting the price right is common sense and so is choosing the right VAT rate for your services (check out freeagent.com/glossary/vatable-sales for more information). Make sure that your customer knows which rate of VAT to expect. For example, if they buy a lot of zero-rated services but yours are reduced-rated, make sure you clarify this with your customer in advance, send them a link to HMRC’s website if needed.
If you’ve just registered your business for VAT, particularly if you’re working with a long-standing customer of your business, make sure that your customer knows that you’ve registered for VAT, otherwise the increased charge might take them by surprise and they may query your invoice.
It may seem pretty obvious, but include the correct payment details. After all, if paying you looks like a complicated process – or requires extra work such as writing a cheque and mailing it to you – then your client may decide to wait until they feel that they can dedicate the time to it.
Add the relevant payment information to your invoice or the covering email. Include your bank details if your customers are paying through online banking or by Bankers’ Automated Clearing Services (BACS), or include an online payment link if you’re inviting your customers to use a tool such as PayPal. If your client can simply click a button and pay you as soon as they receive their invoice, they’ll be less likely to put it off!
If a client is dragging their heels on payment then chase them. If you want your clients to view paying you as a high priority, then it’s a good idea to show the same urgency when it comes to actually sending your invoice. Take advantage of the psychological effect of recency by sending your invoice straight away as soon as your project is completed so it’ll be fresh in the mind of your client. They’ll know exactly what the invoice is for and, hopefully, be more inclined to pay you. Wait too long and there’s a chance they’ll not immediately remember what work you completed, and may prioritise other invoices instead.
If you’re finding a client doesn’t pay you quickly, don’t be afraid to chase up their unpaid invoice. You will have set payment deadlines for a reason, so if they’re not adhered to, you’re perfectly justified in contacting your client for an update. If you’re worried about having an awkward conversation over money, some accounting software will even automatically send chasing emails to your clients – saving you from having to call them.
Getting paid late is a hassle that, in extreme cases, can seriously damage your business. With these tips you can ensure you’re keeping on top of your invoices and lower the risk of it happening to you.