Every week we receive emails from frustrated freelancers about non-paying clients. “Can you help? Is there a formal process I should follow? Should I threaten my client with legal action?“
We regularly assist freelancers with late or non-payment, but it was interesting to hear exactly how you handle credit control as a one-person business.
How freelancers are handling late payments
The most common methods of handling late payments involved:
- Sending automated reminders
- Personally checking in with clients
- Adding late fees to unpaid invoices
- Withholding work until payment is received
- Using debt recovery services
Other methods included using their insurance, sending late payment templates or disrupting the service they provide clients (aka pausing hosting) until fees are paid.
I was happy to see debt recovery mentioned. There’s a taboo with these types of services, mostly down to people thinking a scary guy turns up at your house demanding “can’t pay? We’ll take it away!”.
But I think we should normalise debt recovery. It can be an effective way of recovering money in extreme circumstances and some services only deduct a fee if successful. If your client relationship has deteriorated then there isn’t much to lose with this method.
As an insurance broker the topic of service disruption made me feel uneasy. It isn’t something I would recommend freelancers do because it potentially opens you up to a claim being brought against you for loss of income.
If it is a tactic you wish to deploy then make sure you’ve explicitly built these terms into your contract and the client is aware it’s a consequence of non-payment. For example, if payment is overdue by X days your service will be paused until payment is received.
Jobs to be done
Here’s why you use the credit control tools you do:
- “It makes me look professional” – invoice creation, automated reminders and late payment templates helps people take you more seriously
- “I can nip poor payment habits in the bud” – using your accounting software’s automated reminders means you can stay on top of late payments
- “I can manage cashflow better” – the tools you use help you see what’s late, issue reminders and prompt clients to pay on time
- “I can show clients we’re not an easy target” – following the correct process when chasing payments shows clients you know what you’re doing and won’t be easily taken advantage of
Your least favourite part of credit control
This was surprising. Your least favourite part of credit control is… asking to be paid!
As a freelancer I loved invoicing my clients. I loved feeling like my business was growing and I was being compensated for the value I had delivered or was about to deliver. I’m surprised so many freelancers feel differently and are uncomfortable asking to be paid.
This is definitely a mindset thing. I’d suggest checking out our blog post on raising your rates.
What’s not surprising is that freelancers hate having to manually keep on top of everything. This included matching incoming payments in their accountancy software or checking in with clients if payment was late.
In an ideal world every payment would be made on time, or—if clients knew they were going to be late—they’d be transparent about when exactly payment could be expected. Communication is key!
Here are some patterns we picked up on from the responses to the survey.
- Late fees work in getting clients to pay… but clients don’t actually pay the late fees.
- Freelancers know the importance of filtering out bad clients in advance so they can avoid these issues. This is something we can help with, too.
- Late payment is usually innocent. Many of us jump to conclusions and panic, but most of the time it’s due to something like the client upgrading their invoicing software, a PO not being raised, large organisations battling internal red tape…
- Overwhelmingly the only tool freelancers use for credit control is their accountancy software.
What tools exist to help freelancers manage credit control?
We didn’t want to influence the responses to the survey so we kept our questions broad when talking about payments, but there are plenty of tools to make life easier:
- Accountancy software like Xero, Crunch, Quickbooks. Most of you are using these tools already
- Cashflow apps such as Cushion or Float
- Insurance – hi, we’re With Jack!
- Debt recovery services like Redwood Collections. They can assist with international payments, which are often trickier to recover
- Accounting integrations that automatically add late fees such as PaidNice
- Due diligence reports which help to highlight red flags. We can help you with this
We’d love to hear how you handle late or non-payment. Can you please walk me through the process if a client is stalling on payment?