What to do when you don’t get paid on time
It happens to all of us. In fact, I bet we’ve all forgotten to pay someone for something, sometime, and needed a reminder. So always start out on the basis that it is an oversight – a mistake.
Be firm but be polite and cheerful. Ask if there was anything wrong with the invoice, or with the way it was sent. Ask if there is anything you can do to help invoices get paid faster next time.
But don’t be fobbed off, either with excuses or brazen refusals to pay on time. Make clear the payment time (credit period) is part of the contract. You have carried out your part of the contract and their part of that same contract is to pay on time.
The law
Explain that this is a legal requirement and not an optional extra. Remind them of the late payment legislation and that you are entitled to claim for bills paid late. Explain that late payment charges will end up costing them more and you want to help them avoid those extra charges. You want to work together.
In recent years I have had a rule of thumb to work with a client in this way for three payments. If the first is late we have a discussion about it, with me making any changes necessary to help speed up the process (billing at a certain time to coincide with payment runs or copying the invoice direct to an extra person to speed approvals). I expect them to make changes in return.
They may not get it right still the second time, but I do expect to see an improvement. I will have been in regular contact to check the progress of the payment. These regular calls and emails also give you an idea about whether the company is taking the matter seriously or not.
Usually they get it right by the third time round. If not, you need to make a decision about what you do next.
New or old customers
Most payment problems arise with new customers and then settle down. Every now and then a regular prompt payer will miss a payment through a lost invoice or other error (which would have been spotted had you chased up the invoice after you sent it). Most of the time these are nothing to worry about and can be resolved with a friendly chat.
But late payment can be a warning sign of longer-term and more serious problems. Check the status of each customer before supplying further material. Are they in trouble? Have they their own cashflow problems? Are they solvent?
Strict credit advice would be not to continue to supply if the account is overdue. In reality most of us will supply while a problem is sorted out. But don’t let the amount owed to you build up.
Special terms
You can set special terms (7 or 14 days) if the customer has paid late before. And if the customer fails to meet the special terms, revert to pro-forma invoicing (invoicing and getting paid in advance) or demanding cash on delivery.
Ultimately you may have to cease supplying altogether. That’s a painful decision to make for any freelance, but less painful than working your guts out only for the company to go bust without paying you.