The One Thing All Freelancers Should Do Right Now!
Tuesday, November 29, 2011 at 9:28AM 
In this post I'm going to tell you the little secret that all freelancers or self employed people should know. It will get you paid on time, and if it doesn't, it will make you money! That's right folks, no more waiting around for 4 months for that payment. No more getting behind on bills due to some huge corporation not being arsed to pay you on time. If you're fed up of this, read on!
I only found this out a year or so ago after seeing it on an invoice from my lawyer. I clocked on after realising that a legal team probably knew what they were doing in this department! At the bottom of their invoice, below the payment term of 30 days usual stuff, there was this.
'All invoices are to be paid within 30 days of receipt unless stated to be paid in cash on day of invoicing, If payment is not received within 30 day interest will be charged at the rate prescribed by the Late Payment of Commercial Debts Act 1988, every week after due date until the total amount is received.'
So hang on, if someone pays me late I can actually CHARGE THEM INTEREST?! This sounded too good to be true. I had been paid late so many times that I could have made a fortune in interest if I'd had this clause on my invoices! I wanted to find out what this 'Late Payment Of Commercial Debts Act 1988' was.
I found out that when someone accepts your invoice, they are agreeing to the terms stated on that invoice. If your terms are 30 days for payment and they are late, you can add interest at this formula weekly.
Bank of England base rate (currently 0.5%) + 8%
This makes a huge difference to us freelancers. In theory also, for every invoice that is late there is a compensation payment of £40. So that would be added on top.
Now, apparantly even if you haven't stated this clause on your invoice you can still claim interest but I would imagine it would be a lot harder. So make sure every invoice you send out from now contains the above clause! Here's a template invoice for you to use.
For more details on this, an interest calculator and what to do if you are currently chasing a payment go to this London Freelance page. It is packed with advice and step by step action to take if someone is delaying payment.
Thank me later ;)
Sarah x
Reader Comments (3)
Brilliant.
This wording is useful, I've included it on my invoices for the past decade. But I hate to tell you it doesn't make much difference. Yes, you can add £50 or more to an overdue invoice, but the chances are you'll never work for that company again. And in freelancing, you can't afford to burn THAT many bridges before it starts to impact on your ability to pay the bills.
Of course, late payment is a bind, but it helps (in my experience) to look at some clients as more of a "long term saving scheme" than actual revenue.
More effective, in my experience, is offering a discount to clients that pay on time. I set up a simple online payment form for invoices, linked to my Paypal account, which lets people pay invoices instantly using a credit card. And if they do this, it's a 5% discount on the overall fee.
Now around 75% of my invoices are paid this way, my cashflow is massively improved, and my clients LOVE me because I let them save a bit of money.
Carrots more effective than sticks, basically.
Hey Sally,
Yes I do agree in some respects. It is a small amount that is not life changing for you or the company so there isn't a huge incentive to pay - but it has got me paid a late payment on 2 occasions, just by stating I was going to soon be sending another invoice for my compensation and interest. In my opinion it may burn bridges, but I don't want to be missing rent payments and getting charges for late payments thanks to a company paying me late - if they pay extremely late without any kind of apology then I would be reluctant to work with this company again.
Your idea about the paying on time discount sounds great and would be a great incentive for companies to pay. What a great tip for the readers! Thanks! x