There can be many reasons why freelance invoices are paid late – and, in some cases, not at all. But as a small business, is there anything you can do to prevent it from happening?
Here are 6 things to consider when dealing with late payments.
Don’t panic
Easier said than done, but it really does pay (pun intended) to take all emotion out of the situation and look at it objectively. There might be a reason why the invoice has yet to be paid. And it’s not necessarily an indicator of bad faith on the client side either.
Did you create the invoice manually yourself and forget to add the invoice due date? Did it get ‘lost in the post’, or was there no process in place to issue a reminder?
Invoice software like Invoice Ninja offers customized professional invoice templates, automatic payment options and issue reminders. All elements that can help prevent such oversights to help you get paid faster.
Make contact early
A polite reminder can go a long way and might be all you need to resolve the issue.
But if that doesn’t work, you really need to address the issue in a professional manner. It might be that it’s just an oversight, the invoice has been lost, or there’s an issue with the project that needs to be addressed before payment can be made.
An adult conversation, without the emotion, to get to the bottom of the problem and resolve the situation to both parties’ satisfaction is required.
And it needs to be done sooner rather than later.
With Invoice Ninja you can set up notifications for when a client views their invoices, makes a payment or if the client payment didn’t go through – helping you keep on top of things and flagging issues where something isn’t quite right.
Review contract and deliverables
It’s worth reviewing the terms of reference you agreed to when you commenced the client project.
For example, did you clearly stipulate in your contract about payment methods and due dates? It helps to nail these down at the outset to avoid any misunderstandings when it comes to payment down the line.
Another point to look out for is if you agreed on payment due on completion of a deliverable or on the satisfactory completion of a deliverable. i.e., could it be that the client, for whatever reason, is withholding payment as some part of the project has not been delivered to their satisfaction?
This is why you need to have the conversation early to nip payment issues in the bud.
Consider charging interest
It is possible to charge interest on late payment.
How much you charge will depend on your jurisdiction, but having a policy in place (and clearly stating it on all your invoices) can be a great way to mitigate the risk of late payments.
Alternatively, you can just have a straightforward late payment fee.
If a habitual late-payer thinks they will be charged more, they are much less likely to pay late.
Offer a payment plan
Let’s not overlook the obvious here.
In the current fiscal climate, it may be that your client cannot afford to pay the invoice and may have cash flow problems themselves. If you are able to, rather than lose the client (and your money), then consider putting a payment plan in place.
You may have to wait longer for payment of your invoice in full – but at least you will get paid eventually.
Invoice Ninja has a partial payment feature that can simply handle such a scenario.
After your client pays the partial payment, the invoice will automatically update itself with the balance due and set a new final invoice due date.
Get professional advice
In a worst-case scenario, if your invoice is long past its due date, and you are either being ghosted or the client, for whatever reason, refuses to pay, then consider seeking professional legal advice.
But bear in mind that taking a legal route will almost certainly cost money, time and emotional energy.
Before you take this step, consider sending one last communication to inform the debt defaulter that you intend to take legal action/refer to a debt collection agency – this might spur them into action.
It’s also worth checking your business insurance to see if it covers any legal cover/professional fees.
To summarize
At the end of the day, unfortunately, some clients can turn out to be habitual late payers, and some don’t pay at all.
And while having a contract in place is definitely important, it’s not a magic bullet.
That’s why, in addition to a contract, there are other things you can do to mitigate the risk of late payment.
Invoice software such as Invoice Ninja offers a host of features that can help lessen the risk and keep everything in order.
It’s especially useful for small businesses, solopreneurs and freelancers.
It’s free and offers affordable pro and enterprise plans.
