The Hassle of Getting Paid

Getting Paid

It used to be your favourite day of the month or week when you were employed and received a pay cheque on schedule. It was never a concern, just a good day and probably night down the pub.

Now you are contracting, and have gone to all that trouble of finding work, provided your expertise, sent your invoice off with an expected payment period of within 7, 14 or maybe 30 days, you might find yourself wondering why you have to chase payments and why those happy paydays have become days full of doubt and grief.

Well you’re not alone. Around 60% of SMEs deal with late payments averaging at 43.4 days after the terms specified, according to BACS Payment Schemes Ltd. Such delayed payments can sometimes devastate small businesses by creating cash flow problems which can become unmanageable.

Ways that you can reduce the risk of late payments:

1. Check your client’s reliability

Ask around the company before you start work with them to find out how reliable they are for making payments. If you are still unsure, you could even do a credit check but these are not free, the information could be out of date by about 12 months and it might not be too easy to decipher. It is worth keeping in mind that this would be more difficult to near impossible for smaller companies or other freelancers than large companies.

2. Set terms and clauses

Include a clause in your terms and conditions indicating that all late payments will incur interest. You may not wish to use it depending on your relationship with your client but the option is there and you can at least point it out once a payment is reaching its deadline and still not been paid. If you are completing a rather large piece of work, it may also be worthwhile agreeing to deposit upfront, staged payments or setting a credit limit.

3. Send good invoices

You may have created your own, used a bookkeeping software with built-in invoicing capabilities, or downloaded a template from somewhere, but no matter where you get it from, it is important to send a correct invoice with clear payment instructions.

All invoices should feature:
  • the term ‘invoice’
  • a reference number
  • payment details e.g. bank account
  • payment terms, e.g. 30 days from completion (add any terms such as interest on late payments here)
  • a clear description of the services provided and when if in stages
  • name and address of the company you are invoicing (preferably the person responsible for your payment)
  • the relevant VAT information in line with the regulations if applicable.

You should double check all invoices before sending them to ensure there are no mistakes which might give your client an excuse to delay payment.

Although you can help reduce the risk of late payments, you will inevitably have to deal with them in your contracting career. The important thing is to follow up on any unpaid invoices, being firm whilst remaining calm. It is an unpleasant task but worth the time and effort. Otherwise, you are working for free. Contact us today to learn more about our accounting services.

More Blogs

Benefits of hiring a limited company accountant

Running a limited company can be extremely rewarding – but also challenging. As well as the creation, marketing and sales of your products or services, there are many other elements to consider: logistics, customer service, payroll, HR and more. One area that many small businesses find particularly challenging is managing their accounts. From day-to-day bookkeeping to filing and paying taxes, it’s an area with a great deal of regulation – and one that’s vital to get right. While some choose to do this themselves, it can be stressful and time-consuming, with the added worry about what will happen if you get things wrong. Hiring a limited company accountant can take this stress away, and choosing online limited company accounting services can still make things easier.

Accounting Team

What is a CT41G form? A complete guide

The CT41G form—the “Corporation Tax—New Company Details” form—is a vital piece of paperwork for UK businesses. When a business registers with Companies House, it triggers a notification to HMRC, which sends a Form CT41G to the business’s registered offices. The purpose of the form is to provide HMRC with confirmation of the company’s existence and provide you with the relevant tax information.

Accounting Team

Crowdfunding my business: Do I need to pay tax?

Starting a business can be expensive. While some have money set aside to do so, others opt for bank loans to make their dream happen. However, there is another option, and that’s the crowdfunding approach. But do you pay tax on crowdfunding? Is crowdfunding tax deductible? We’ve put together this guide to answer all your questions.

Accounting Team