2 min read
As a freelancer, chasing late payments is comfortably one of the worst parts of the job. Because, while a business might have a whole accounting department charged with ensuring its employees get paid promptly for their efforts, sole traders lack that luxury and must rely on their own wits and charms.
The problem is that, as a freelancer, particularly in this current climate, you could always be just a few late payments away from going out of business. Because freelancers traditionally live from job-to-job and from payment-to-payment. You might be able to let a small invoice slide but if you are waiting on invoices from months ago that are worth multiple thousands, it can become a serious problem.
Thankfully, if you’re currently operating as a freelancer and want to encourage prompt payment from your clients and customers, there are solutions you can turn to if you want to mitigate late payment problems.
Take full payment upfront
Another option is to work strictly on a payment upfront basis. Of course, this might not always be a realistic option, particularly for freelancers who are just finding their feet. The middle-ground option here would be to take an upfront deposit and only release the completed work when the final payment has cleared.
Again, however, this will only be possible for certain businesses, depending on the product or services offered. More often than not, taking complete payment or even partial payment upfront is simply not practical.
Issue late payment fees
For many businesses, issuing late fees when payments are delayed is common practice. So why shouldn’t the same be the case for sole traders? As a freelancer, the relationships you have with your clients and customers is of paramount importance and the last thing you want to do is offend anyone.
But you’re running a business and sometimes the only way to make clients understand that is to remind them. Those that genuinely value you and your work should be more than happy to agree to the terms and should be understanding of the fees.
Know your rights
You are due late payment fees the moment your invoice is overdue, as stipulated by law. Indeed, the government deems “late” to mean any date after the agreed term. If the date hasn’t been set, the default is 30 days after you deliver the invoice.
Your late payment fees should be made up of both the interest on the amount owed to you and a debt recovery fee relative to the amount (which will typically be between £40 and £100). The statutory rate is 8% but you are free to stipulate your own terms. You might, for example, opt for a 5% interest that rises in increments for every week or month that passes. Whatever option you choose, however, know that you are well within your rights.
Improve your payment processes
Perhaps the most fundamental way to ensure your payments are never late is to improve the way you actually collect payment. GoCardless is a platform engineered to help businesses and sole traders reduce the time it takes to get paid.
We offer direct debit, a pull-based payment method that allows freelancers to get paid automatically on the date of their choosing. We also offer Instant Bank Pay, which lets them take one-off, same-day payments via Paylink. This would be ideal for offering extra services beyond the scope of your retainer, or for one-off projects. GoCardless can also integrate seamlessly with the platforms of our major accounting partners, so you can send and reconcile invoices automatically.
By simplifying and centralising your payment solutions with a respected payment partner, you’ll not only reduce the stresses associated with late payments but will be able to control when and how you get paid.
We can help
If you’re interested in finding out more about avoiding late payments as a freelancer, or any other aspect of your business finances, then get in touch with our financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.