Freelancing has a number of great positives – you’re your own boss, the pay is generally better and you can be flexible with your hours. However, there are a few drawbacks that do come with working as an independent professional.
Late payment from a client is one of the biggest problems that a contractor or freelancer has to face. Not only can it have an impact on your working relationship with said client but it can also have a serious effect on your personal one as well.
However, there are a few steps you can take to preventing late payments and hopefully reduce the likelihood of this happening or, at the very least, have a fail-safe in place if a client does let you down.
Consider an agency
Working with an agency as your middleman has it’s own pros and cons, but the fact is you’re less likely to be paid late using one.
The main reason for this is that a recruitment agency has its own dedicated accounts department who are there to look after this aspect of your contract.
Outline your payment terms
If you are working directly for a client, you must outline and agree on your payment terms beforehand. If you do not specify a definite payment period, it’s likely that the standard 30 day time frame will apply.
The best way to stop a problem like late payment from getting out of hand is to act upon it as soon as you can. When you realise that a payment is delayed, call the accounts department and politely discuss the situation with them. Hopefully it’s nothing more than a technical issue that can be dealt with on the spot.
In the event that you are being paid with a pre-determined lump sum, you may wish to ask for a deposit. If you take five per cent of your pay beforehand you can at least cover some costs should the client fail to pay the rest on time.
Double check the information
Check and double check that you have provided a client’s payroll department with your most recent and up to date information. Do the same for the client’s accounts section. Make sure you have all the contact details for the relevant person in case you need to chase up a delayed payment, or deal with a problem, related to your pay.
Make use of an online accounting service so that you can track your ingoings and outgoings. You can see what you are owed and what you are awaiting and if a payment is outstanding, you can chase it up immediately.
By keeping on top of things, you’ll be more likely to catch problems earlier.
Run a credit check
It could be wise to run a credit check on any clients you are working with for the first time. This may be a good idea if the contract is a long one or if you are intending to work with them in the long term.
Although late payment is never ideal, it’s a good idea to have a little money saved for an emergency. ISAs provide you with quick access to funds that can be used to pay bills or meet any financial obligations you have, should a payment be late – the amounts you can save each year tax free have also just been increased.
Charge interest and legal action
Under the Late Payment of Commercial Debts (Interest) Act 1998 – and more recently EU Late Payment Directive, which came into effect 16th March 2013 – all companies have the right to charge interest on a late payment. This a legal right, although many do not wish to do so in case it upsets a client and has a knock on effect with future employers.
However, it’s worth bearing in mind that you are within your rights do so. In cases where late payment is persistently occurring and becoming a real problem, you may wish to do so.
You can also pursue legal action if the payment terms in your contract is not met. It may be wise to talk to a solicitor that specialises in financial law before taking any steps towards the courts.
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