How to politely ask for payment: how to collect money from clients who won’t pay
Getting customers to pay their bills is one of the top issues freelancers have: sad but true! As a freelancer, maintaining a healthy cash flow is crucial for your financial stability and success. One of the key aspects of achieving this is mastering credit control, which ensures that you get your invoices paid on time. In this article, I’ll share effective strategies to help you navigate the challenges of invoicing and payment collection, empowering you to handle late payments professionally and efficiently.
What is Credit Control for Freelancers?
Credit control for freelancers refers to the practices and strategies employed to manage and maintain a steady flow of payments from clients for the services provided. It involves setting up systems and procedures to ensure that invoices are issued on time, payments are collected promptly, and any overdue payments are followed up in a professional manner.
The Basics of How Invoicing Works
Before delving into credit control techniques, let’s review the basics of invoicing. An invoice is a formal document you send to your clients, outlining the details of the services you’ve provided and the amount owed. It typically includes:
- Your business name and contact information
- An invoice number
- The date it is issued
- A breakdown of the services or products provided
- The total amount due
- The payment due date and bank transfer information
Invoices can be raised directly from your accounting software if you have one, or you can make one manually using Word or Excel (or any equivalent programme). You should have a template you can copy and adapt every time you are issuing an invoice.
How to get customers to pay their bills
Here are the most effective ways to get your invoices paid on time, request payment for overdue invoice, and what to do when invoices are not paid on time.
1) Set a Clear Payment Schedule with Your Client
When starting a freelance project, be proactive in discussing the payment schedule with your client, and make sure you include it in your contract or agreement. Clearly communicate your expectations regarding when you’ll issue invoices and when you expect payment. Establishing these terms upfront helps prevent misunderstandings and sets a professional tone for your working relationship.
You should aim to be paid at the beginning of a new stage of work, so that it’s easier to understand what work has been covered by a payment, and what work refers to a payment that has yet to be made.
For example, for a freelance designer, your payment schedule can be something like this:
£500 – Kick-off meetings and initial logo draft
£500 – New font and visual comms proposal
£1,000 – Website review and new theme implementation
£500 – Debugging and staff training
Rather than project phases, you can also use dates or other milestones that make it easy for you to understand up to which point you’ve been paid.
2) Don’t Continue Delivering the Work Until the Relevant Invoice is Paid
To maintain control over your cash flow, avoid continuing work on a project until the relevant invoice for that phase is paid. This practice ensures that you’re not investing time and effort without any guarantee of timely compensation.
Include a line in the contract that clarifies that you may not continue to deliver the work, should the client be in breach of the payment schedule, and that no work should be expected or demanded if the payment schedule isn’t followed.
3) Include Late Payment Surcharges in Your Invoice
To encourage clients to pay on time, consider including late payment surcharges in your invoices. This can be a percentage of the total amount or a fixed fee. However, it’s essential to comply with the UK’s Late Payment of Commercial Debts (Interest) Act 1998, which governs late payment charges. According to the Act, you have the right to charge interest on late payments and claim reasonable debt recovery costs after the payment becomes overdue.
The Late Payment of Commercial Debts (Interest) Act 1998 is an important piece of legislation in the UK that offers protection to freelancers and businesses against late payment of invoices. It includes guidance for what to charge for late invoice payment. Here are key points from the Act that freelancers should be aware of when dealing with customers who aren’t paying their invoices on time:
- Right to Claim Interest: If a customer fails to pay an invoice on time, the freelancer has the right to claim interest on the overdue amount. The interest rate is typically 8% plus the Bank of England base rate.
- Claiming Debt Recovery Costs: In addition to interest, freelancers can claim reasonable debt recovery costs from customers who pay late. These costs can include administrative expenses incurred to recover the outstanding payment.
- Fixed Payment for Debt Recovery: For invoices up to £1000, freelancers can claim a fixed sum in addition to the interest and debt recovery costs. The amount depends on the outstanding invoice value.
- 30-Day Payment Period: The Act sets a standard payment period of 30 days from the later of the date of invoice or the date of receipt of goods or services, unless otherwise agreed in writing.
- Contractual Terms: Freelancers have the right to set their own contractual terms for payment, including payment deadlines and late payment penalties. However, these terms must be fair and reasonable to be enforceable.
- Public Authorities and Late Payments: The Act also applies to public authorities and provides provisions for interest and debt recovery costs for late payments from them.
- Exemptions: There are some exemptions for certain financial transactions, and the Act does not apply to non-commercial contracts or consumer transactions.
Read more about this Act on the government’s website, and make sure you know what your rights are as a freelancer.
4) Issue Invoices at Least 2 Weeks in Advance of Their Payment Due Date
Sending invoices well in advance of the payment due date gives your clients ample time to process the payment and helps them remember the deadline. Additionally, it demonstrates your professionalism and commitment to prompt payment.
You should also know that it is often unfeasable for a company to pay an within one or two days of sending the invoice, unless there is a very good reason for the payment to be expedited and if it is signed off by a senior member of staff.
This is because companies have financial and budgetary checks in place that make the invoice processing slower than what you might think. This is what happens in most companies when an invoice is sent:
- The budget holder needs to approve and code the invoice
- The coding and formal approval are sent to the financial department, which double checks the coding and posts it on the accounting software.
- Companies usually have a designated payment run date (eg: every Friday or every other Wednesday), so the invoice would stay unpaid until the next payment run
- The finance department prepares a payment run and sends it for approval to a senior member of staff
- The payment run is approved or queried by the senior member of staff
As you can see, there are several steps there, and the bigger the company, the more steps there are. This helps with financial controls, but it is reliant on many members of staff to delegate time for financial checks and approval.
So, the earlier you send your invoice, the better. I recommend sending it no later than two weeks before the payment due date to ensure you get your invoice paid on time.
5) Automate Invoices
Consider using accounting software to automate the invoicing process. Automation saves time and reduces the chances of human error in creating and sending invoices.
If you have agreed on a payment schedule with the client, or if you are on a monthly retainer, you can set up the system so that it automatically sends the invoices on a specific date, lightening your workload and helping you stay on top of invoicing.
6) Set Automatic Email Payment Reminders
This is also possible if you have an accounting software you send your invoices from. An automated email reminder system can be an effective way to nudge clients who might have overlooked their payment deadlines.
Sending friendly payment reminders a few days before and on the due date can encourage clients to make timely payments.
7) Always Be Polite and Professional in Your Communications
When requesting payment for overdue invoices, maintain a polite and professional tone in all your communications. Chasing payments can be a bit awkward, especially if you have built a rapport with your client over time.
However, remember that it is your right to be paid, and to receive compensation for your work as agreed with the client. Avoid confrontation and focus on resolving the issue amicably. Sometimes, clients may have genuine reasons for delayed payments, and being understanding can help maintain a positive working relationship.
8) How to Politely Ask for Payment (Example)
Here is an example of an email I sent to a client that was withholding payment and being unresponsive:
Dear [Client Name],
I hope you are very well. I am touching base with regards to the attached invoice, which was sent to you on [date] for [invoice amount].
Unfortunately, this invoice is still unpaid, despite the payment being due on [payment due date], as agreed in our payment schedule. I have already chased this invoice on [date] with no response, so I am CC’ing [project supervisor] for their information, too.
I will be unable to allocate any more of my time to [project name] until the invoice is paid, as I am being careful with my capacity and will be prioritising my paying clients.
Should you wish to talk about this further, I am very happy to hop on the phone at any time.
9) Call the Customer’s Finance Department
If all else fails and a client’s payment remains outstanding, don’t hesitate to reach out to their finance department. Engaging directly with the responsible team can expedite the payment process and shed light on any potential issues causing the delay.
You should mention that withholding payment for a service that has been contractually agreed is unlawful, and that you may bring this to the Small Claims Court if the invoice isn’t paid promptly.
10) Refer to the Small Claims Court
As a freelancer in the UK, you can use the Small Claims Court to pursue unpaid invoices in a straightforward and cost-effective manner. The Small Claims Court is part of the county court system and is designed to handle low-value claims, including unpaid invoices.
Here’s a step-by-step guide on how to use the Small Claims Court:
- Attempt Amicable Resolution: Before resorting to the Small Claims Service, try to resolve the matter amicably with your client. Send them a polite reminder of the unpaid invoice, and if needed, follow up with a formal letter stating your intention to pursue legal action if the payment is not made within a specified timeframe.
- Check Eligibility: Ensure that your claim is eligible for the Small Claims Service. Generally, this service is suitable for claims under £10,000 in England and Wales, and under £3,000 in Scotland and Northern Ireland.
- Gather Evidence: Collect all relevant evidence to support your claim. This may include the original contract or agreement, invoices, delivery notes, emails, and any communication showing that the client acknowledged the debt.
- Online or Paper Form: You can initiate your claim online through the Government’s Money Claim Online service (for claims under £10,000) or by completing a paper claim form (N1) available from your local county court.
- Provide Details of Your Claim: Whether filing online or using the paper form, you’ll need to provide details of your claim, such as the amount owed, the reasons for the claim, and the supporting evidence.
- Pay the Fee: There is a fee to submit a claim through the Small Claims Service. The fee varies depending on the value of your claim. If you win your case, you may be able to recover this fee from the defendant.
- Serve the Claim: If using the paper form, you must serve a copy of the claim form on the defendant (the client who owes you money) within a specified time frame. If filing online, this is done electronically by the court.
- Defendant’s Response: The defendant will have a limited time (usually 14 days) to respond to the claim after being served. They can either admit the claim and pay, dispute the claim, or request more time to respond.
- Mediation: In some cases, the court may suggest mediation to help both parties reach a resolution without going to trial.
- Court Hearing: If the defendant disputes the claim and no resolution is reached through mediation, a court hearing may be scheduled. You will need to present your evidence and arguments to the court.
- Judgment and Enforcement: If the court rules in your favor and the defendant still doesn’t pay, you can request a judgment to enforce payment, which may involve various methods, such as instructing bailiffs or applying for a charging order.
Using the Small Claims Service can be a cost-effective way to recover unpaid invoices, but it’s essential to be well-prepared and follow the correct procedures throughout the process. Consider seeking legal advice if you’re unsure about any aspect of your claim.
Conclusion on how to get your invoices paid on time
Managing credit control as a freelancer is a skill that can significantly impact your financial well-being. By following the strategies outlined in this blog post, you can increase the likelihood of getting your invoices paid on time and build stronger relationships with your clients. Remember, being proactive, polite, transparent, and professional in your credit control efforts will go a long way in establishing your reputation as a reliable and trustworthy freelancer. Happy freelancing and may your invoices always be paid promptly!
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