Advice on Chasing an Unpaid Invoice

(3 minutes to read)

When it comes to being self-employed, there is a slight risk when it comes to ensuring that clients pay you on time, however, there are methods to help with this situation, as well as steps to take to prevent this happening, such as requesting payment or a deposit upfront.

There are so many benefits to being self-employed, not only do you have the type of freedom, control and flexibility permanent workers can only dream of, you could also potentially earn more compared to a full time worker in the same role.

Other advantages include:

  • You can work when you want, can take holiday days as little or as often as you wish (although it’s worth remembering you won’t get paid for this time off) and you can potentially have a better work / life balance.
  • The majority of contractors can charge a daily or hourly rate much higher than a permanent employee in the same role. Of course, your individual skills and your industry could mean your rates could be even higher.
  • You are able to claim back expenses that are made for the running of your business, which can then reduce your tax bill at the end of the tax year.
  • You will gain in terms of skills and experience by working with a number of clients in various industries.

Of course being your own boss will come with more responsibilities and there are some risks, with one of these being that you could find yourself in a situation where you are paid late by your client.

Late payments

Having to chase up a late payment is extremely inconvenient for someone who is self-employed.

Late payments can be an issue for many contractors, with research showing that this can be the cause of many small businesses getting into financial difficulties.

However, the government is working hard at preventing SMEs finding themselves in this situation. On 31st January 2017, the government released a statement about late payment reporting guidance for large businesses; the plan is for large firms to publish details on the time taken to pay their suppliers in order to shine a light on ‘bad practice’.

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How do I go about chasing a late payment?

It is never a nice situation to have to remind a client to pay up; you just have to remember that there could be consequences for whatever action you take. It could mean no longer working with this client in the future, as things might get a bit awkward, but at the same time do you even want to work with them if they are going to cause you issues with payment?

Make sure you keep it civil and polite to begin with, as you could even find that this is a genuine mistake and that the client has simply forgotten. This would be the ideal scenario.

The first step to take is to phone or email the client and if you email and don’t get a response, call them.

If you still don’t get paid then write a letter or email to them explaining that they have a certain number of days to make payment, otherwise they will be charged statutory interest.

There is also the option of using a debt collection service or solicitor, with both being able to give you the best advice of how best to go about retrieving your payment. Although this could end up costing you money, you are well within your rights to charge the client a fixed amount for the costs incurred while trying to recover the payment.

How to avoid late payment

Prevention is better than cure and so whether you’ve had to learn the hard way or not when it comes to chasing unpaid invoices, it is most definitely worth taking precautions in order to avoid being in the situation at all.

Although easier said than done, it is worth doing a bit of research on the client you will be working with in advance to find out if they are a reputable company, perhaps even running a credit check too.

Look at creating your own payment terms and conditions with clear information on when a payment is due etc.

Consider requesting payment up front before work is carried out, or if a client doesn’t agree with this, at least ask for a deposit.

Make sure you invoice the client immediately after finishing the work, including information on statutory late payment interest.

Why Dolan Accountancy?

Dolan Accountancy was set up by Simon J Dolan, the man behind the well-known brand SJD Accountancy. With over 25 years experience in the contracting marketing, Dolan Accountancy has the heritage, reputation and credibility you can trust. Working closely with our sister company, ContractorUmbrella, it means we can offer one low cost, fixed fee package at £95 + VAT per month. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost. We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours.
  • Free use of ContractorUmbrella – With changes in Public Sector IR35 Legislation we understand that sometimes you are required to contract via an umbrella company. We will keep your limited company ticking over, while you work margin free via our sister company, ContractorUmbrella.
  • A Dedicated Accountant – Your accountant will be there for any company or personal tax advice that you require. We will never outsource work, even to internal teams.
  • Free Access to FreeAgent – The founder behind the multi award winning FreeAgent platform was one of Simon’s first clients, therefore it only seems fitting that we offer all of our clients access to FreeAgent, free of charge.
  • Free Business Banking – We have decided to waive our commission so our clients can use CashPlus free of charge for the first year, saving you £69.
  • Unlimited IR35 Status Reviews – We will review all of your contracts for IR35 purposes and provide you with our professional opinion as to its status.
  • Free Registered and Director’s Service Office Address – Sometimes you just don’t want your home address on display at Companies House. When you sign up to our accountancy services, we will offer the use of our address as an alternative.
  • Your Business and Personal Taxation Needs – This includes Company Accounts, Director’s Personal Tax Return, VAT Returns, Payroll, Corporation Tax and Dividend advice, to name just a few.

If you’d like to find out more about how Dolan Accountancy can help you and your business, please give us a call on 01442 795100 or email sophie.lewis@dolanaccountancy.com or jaime.thorpe@dolanaccountancy.com.

Dolan Accountancy