Last week, my business made £1,180 from a customer without doing any work. All it took was for this particular customer to pay their invoices late.
I know that Late Payers are a constant worry for the majority of freelancers and small businesses. The majority of my own customers pay late. However, on the whole, my late payers are only 2 or 3 days late in making their payments – which I can live with.
But this one customer was over 80 days late in their payment, and the amount was large – very large. In fact, the original invoice was nearly £60,000 in value. As you can imagine, when the amount is so large, and with payment being so long overdue, it can lead to a lot of sleepless nights – will they pay at all? Will I have to take them to court? Will they eventually turn around with 1,000 reasons why they are not paying (delivery was not as they wanted, etc)? In short, would I ever see the money?
I had a signed contract – so was covered from that point of view. In the contract, it talked about my terms and conditions, which included my late payment penalties – so was covered there. And my online accounts system (the wonderful FreeAgent was regularly sending them chase notifications).
After the invoice was 30 days overdue, and after a lot of worry – I bit the bullet – and raised a late payment invoice for 30 days of interest (8% over the base rate – so maths = (((amount of invoice + 8.5%)/365 days) * 30 days) plus my £50 admin fee.
30 days after that, I raised another 30 days of interest and another late payment fee, and then a third late payment invoice. They now had four invoices outstanding (the original plus 3 late payment invoices)
After the third invoice, it did seem that I was wasting my time – I was calling them and was being given more and more complex reasons for the late payment (we have a new accounts system, the payment manager is on holiday, its in the next payment run) – I even started to research on Google which debt collection company would have the most success (and which would cost me the least).
And then, guess what…. they paid. There was no email or call or anything – the money just magically appeared in my company bank account. Not only did they pay the original invoice, but also the late payment invoices – so an extra £1,180 into my bank for no effort from me.
And you know what – that’s more money than I would have gained in interest in having it sit in a bank – so I am very happy.
We all suffer bad payers – but don’t give up. Chase, chase, and chase some more. When things get too much, threaten and then do it – raise that late payment invoice. Don’t put up with those late payers. And don’t wait until they pay to raise a late payment invoice – raise one a month – it acts as a reminder to pay the original invoice (and that you are serious).
As long as you have a signed contract and a clear set of terms, the law is on your side.