Caroline Gibson

PRO

1 June 2015

Invoice payment well overdue? Here’s what to do next

So you submitted your invoice and waited patiently for it to be paid. But the payment deadline has passed and there’s no sign of your money. What next?

When do you start chasing an unpaid invoice?

It depends on how well you know the client and your relationship with them. But even with trusted clients, don’t leave it too long – here’s a cautionary tale from my own experience…

Many years ago, I worked with a client while he was MD at a design agency. He left to set up on his own and I worked with him again. I naively believed his promises to pay the seven invoices he owed me as soon as his other clients had coughed up. (Why wouldn’t I trust him, as I knew him well? Hmmmm.) What I should have known is that my contract was with him so it was his duty to pay, regardless of whether or not his clients had settled their invoices.

Calendar page with date circledIf the payment deadline has passed, send a follow up email within a few days. If you don’t get a response, send another. Ring the person in accounts too.

If you suspect the client may be in financial difficulties, then start thinking about what action you need to take – if they go into liquidation, you’ll lose out on any right to get your invoice paid.

Quote some Latin

A client may query your invoice, claiming the work was never used. This isn’t the point. Unlike journalists who are paid per word, freelance copywriters are paid for the time spent.

I was once given a great tip by a lawyer friend: reply saying work was done ‘quantum meruit’. This means you’re entitled to be paid for what you believe to be the reasonable value of your services.

Tell the client they owe you even more

Thanks to the Late Payments Act, you’re entitled to claim late payment interest and compensation for debt recovery costs, even if your invoice doesn’t state it. Pay On Time is a brilliant website to help you calculate late payment interest and get letter templates. You can also contact them for advice. Their website says:

Businesses are entitled to claim compensation when a debt remains unpaid after the date specified on the contract, or in the absence of a contract, 30 days after the delivery of the goods or service.

Write a letter stating that if the client doesn’t pay within x days (don’t give them too long – five days is fine after all this time), you’ll charge them for late payment interest and compensation. Also state that the interest will continue to accrue until the whole debt is repaid.

You could also state that you may start court proceedings if the invoice is not settled promptly. But this shouldn’t be an empty threat, so familiarise yourself with what would be involved, to check you would be happy taking this action. Court proceedings may result in a CCJ (County Court Judgement) against the company or individual, so the possibility of court action should definitely jolt them into action. Having a CCJ is like a great big indelible black mark on someone’s credit rating for six years.

Keep track of all correspondence

In case you do decide to take legal action, the court will want to see you’ve given the debtor every possible opportunity to repay – such as email reminders. Keep these as a record and send follow up letters by recorded delivery (keeping proof of postage).

Check your facts are right

Make sure you have the correct invoicing address.

When I first took a client to the small claims court, I thought he was a registered limited company. He wasn’t. He was self-employed and I should have given his name followed by the name of the company he was trading as. Although I successfully had my claim upheld, I couldn’t take further legal action so had to redo the claim again.

Check details for free at Companies House. The address a client is registered at isn’t necessarily the same as where their office is located.

You’ve issued several late payment warnings, but they’re still ignored

Taking legal action online yourself at Money Claim Online can be far cheaper than using a lawyer or debt collecting agency – plus you get back any of the costs incurred in doing so.

The system is set up to help small businesses and sole traders who are owed a fixed sum under £100,000. It takes about 30 minutes to fill out the small claims court form – you can call for help about filling in the form but not for advice – and you need to register an account with the UK Government Gateway first. You’ll have to state why money is owed within a certain word count so prepare this in advance. Keep to the facts – they’re not interested in emotional rants.

The client will then receive a court letter, which hopefully should send them into enough of a tizz to make them pay. If they don’t, after a period of time stated, the court will award in your favour and award a CCJ against your client. Unfortunately, this still doesn’t guarantee that you’ll get paid and you may need to consider further action.

Should you send in the heavies?

One enforcement option is to send in the bailiffs. However, they can’t force entry. If granted access (unlikely!), they’ll simply take items to sell on (computers, for instance) and you’ll get any proceeds. Personally, I’ve never considered it worth doing.

If you really can’t face the hassle of chasing up and taking court action, you could just appoint debt collectors. However, they have no legal powers and aren’t meant to intimidate. So you might end up paying them and still getting no further.

What are your other options?

If your client is self-employed, you could take out a charging order which is a claim for payment from the proceeds of their house should they ever sell it to pay off debts. Or you could ask for their bank account to be frozen, though you need to know all their account details.

Whatever you decide to do, it will involve time, effort and money.

It took me two years to get paid by the client mentioned at the start of this post. Read my previous blog post How to get paid on time, every time to discover the steps I now take to avoid this nightmare ever happening again


Remember that before taking any major decision regarding the management of your business or freelance career, you should take advice from qualified professionals such as accountants, lawyers or business advisors.


What do you think?

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Julian Abel

February 27, 2016 at 5:12pm

Hi fellow PCN members,
Does anyone have any advice on the following situation?
I’ve been working with a designer (who has a limited company) on a brochure for her client. I submitted the first draft several months ago now, and due to an office move and shifting priorities the client still has yet to provide feedback on my copy. I haven’t yet sent the invoice for 50% of the final balance as the designer has assured me she’s been chasing the client and the project will pick up again soon. This keeps dragging on and I’m quickly losing patience. From the designer’s perspective, her hands are tied and she can’t pay me until she gets paid herself. But my contract is with her company, not the client.
Any advice would be most appreciated.
Many thanks
Julian

PRO

Caroline Gibson

February 28, 2016 at 9:55am

Hi Julien
It’s a tricky one. As you say, your contract is with her. It’s therefore her responsibility to pay you – no matter what’s happening with the client. So ignore that argument of ‘she can’t pay me until she gets paid herself’. That’s totally untrue.

The problem is that the job’s not finished so, in theory, you can’t expect to be paid for incomplete work.

I don’t know what terms you agreed (and at least you’ve already got 50%), but the ones I ask clients to sign include two key points to cover me in this situation: ‘Payment is for my time incurred and is regardless of whether or not the work is used’ and ‘Should you for any reason fail to maintain communication with me for 21 days, I reserve the right to invoice for all work to date’.

My mantra is ‘If in doubt, bill it out’. In this instance, I suggest you send an invoice dated, say, a month from now with an email to say ample time has passed already and that you feel a month from now (or however long) is sufficient to get feedback and make any revisions before approval. Hopefully, setting this deadline might prompt action.

Before submitting this, check you have her correct address as a limited company on Companies House. If this website states a different one to the one she’s given (which may be an office/home address instead), make sure you use it instead. It’s very important to have this info correct in case you do need to start legal proceedings (as explained in my blog which you can read here or on my site at http://www.carolinegibson.co.uk/getting-clients-to-pay-on-time/).

If you still haven’t been paid after invoicing, then follow the steps I’ve set out – especially the section entitled ‘Quote some Latin’! And, I guess, in future, work out a contract direct with the client (your designer may be creaming off a tasty mark up on your fee).

Good luck! Let me know what happens.

Caroline

Sophia

February 19, 2017 at 9:06pm

Thanks for your post, very helpful!

P H

April 12, 2017 at 10:35am

We have carried out work on a back end payment when work is completed from our leads. We started work in September 2016 knowing payments should and did start to arrive from our leads. We now know that we should have had payment up to mid March of around £20000. We have invested around £75000 in producing the leads & have proof that the Ltd company has received over 2500 leads which at least 25%+ will produce, using the lower average commision of £175 the estimaed commision will be over £110000. We estimate that at present the commissions due to date will be around £35000 but as we have stopped work producing leads for the company as we have received no commisions, they have cut of our communication were we could check the status of the leads so we are now in the dark. We invoiced them for an interim payment of £10000 & e-mailed for reasons for non payment but they admitted in writting that they had used our commission payments to pay their staff and couldn’t pay us. They said they would start to pay some small payments until they came up with a proposal – no payments or proposal has arrived. We are now considering which is the best avenue to go down.

r.day

September 8, 2017 at 5:05pm

really good and to the point

Tosha Vallis

October 12, 2017 at 9:52am

Thanks you so much for this. I have found your advice invaluable when dealing with something similar. Honest people will always triumph in my opinion.