The FreeAgent Blog
From the dog eating the invoice to radio silence, some clients will try a range of tactics to get away with paying you late. So what do you do when it comes to chasing payment? Here are some classic excuses that we’ve heard before and our top tips for working with late-paying clients to make sure you get the money that you’re owed!
“The cheque’s in the post!”
Ok, it’s probably unlikely that you’re being paid by cheque but the concept of “the money’s on its way, honest!” is universal. And if you find yourself being fobbed off repeatedly without ever receiving payment, you can be pretty certain that the client is stalling for time.
If the client says that they’ve paid but you haven’t received any cash, you could start by asking for ‘remittance advice’, which is a letter that a finance department will send to prove your payment has been issued. If you’re pretty sure no payment has been issued, you could try offering a more immediate payment option by allowing your client to pay you online - in FreeAgent, you can add a payment link to your invoice email using services like GoCardless or PayPal. Your client can then just click to pay you online via their bank account or credit card - pretty much instantly.
“We haven’t used the work yet”
Freelancers also often hear “we decided to do the work in-house” or “we ended up cancelling the project” as an excuse not to pay. If a client tries to delay payment (or withhold it altogether) by claiming that they’re not using the work you did for them, then you need to challenge this, and fast. If their plans change once the agreed work has been completed that’s unfortunate, but you’re completely entitled to be paid for the work that you did for the client, whether they use it or not.
To prevent situations like this, it’s really important to have a good contract in place before you begin work. The contract should make it clear that the client is paying for your time and work product, not their ultimate use of the work. You can both agree your expectations for the work in the contract (which should include the work you’ll do, how much it will cost, how long it’s likely to take and when you’re going to invoice for it) and then you’ll have something robust to rely on if clients make excuses like this.
“Wait, have we not paid you yet? Actually, I can’t find your invoice - are you sure you sent it? Hang on, let me look through this stack of paperwork...”
The disorganised chronic late payer will usually pay up eventually, but not before those unpaid invoices have drained away your healthy cash flow. By keeping an eye on your aged debtor report in FreeAgent, you can identify clients who frequently pay late. You can cut down on the time you take to chase chronic late payers by using FreeAgent’s automatic invoice reminder feature - just set it up before you send the invoice, then FreeAgent will do the chasing for you!
Hello? Anybody there? There’s nothing worse than having a client who just disappears without a trace. They won’t return your emails or calls and you simply can’t get hold of them.
For these clients - some of whom sadly may have had no intention of paying you in the first place - you’ll have to make a choice. You could hire a professional collection agency, or for smaller debts, pursue your client through the small claims court. Both of these options could be time consuming and may end up costing you money. However, you can charge statutory interest on late paying invoices, which is 8% plus the Bank of England base rate - there’s a great article about this on gov.uk. Alternatively, you could cut your losses and write off the invoice, before putting that client on your blacklist.
“Money is a little tight right now...”
Any business can go through unforeseen difficulties, so if a client hasn’t paid yet it may not mean that they’re not planning to pay at all - it might be that they’re facing short-term cash flow problems.
Even if you think the client can’t pay, it’s worth having the awkward conversation and picking up the phone to ask when they plan to pay you. If it is just a short-term issue with a good client, you could maintain a good relationship by offering an extension rather than enforcing late charges. And in future you can easily check a client’s creditworthiness using online services such as DueDil and CheckBusiness, which provide free access to credit scores for businesses.
Exciting news: you can now log in to FreeAgent mobile using your fingerprint!
This feature is available for:
- all iPhone 5S (and above) iOS devices
- all Android 6.0 devices with fingerprint readers
To turn fingerprint authentication on, simply navigate to the ‘Settings’ menu in FreeAgent Mobile on your iOS or Android device, find the ‘Security’ option and check ‘Enable touch ID’ for iOS devices or ‘Enable fingerprint authentication’ for Android.
Once you’ve done that, FreeAgent will lock your access to the app until you authenticate with your fingerprint or re-enter your password. If you want to keep your access open while you use other apps, you can set FreeAgent Mobile to remain open for a period of time (e.g. two minutes) before it prompts you to re-authenticate with your fingerprint or password.
Stay safe and secure!
Roan and the FreeAgent team
Setting up a limited company or incorporating an existing sole trader business can be a daunting prospect, but with a bit of careful planning, it can be a straightforward and stress-free process. Here Graeme Donnelly, director and founder of the company secretarial agency Quality Formations, outlines some key mistakes to avoid when forming a limited company.
Mistake 1: rushing your application
It goes without saying that you should take great care when completing a company formation application, but unfortunately, many people rush it and end up making mistakes that take time to rectify. The majority of rejected applications and post-formation changes are the result of simple, avoidable oversights, so please take your time. The most common issues are caused by:
- Incorporating the wrong kind of company. It’s very important to choose the correct type of company (either ‘limited by shares’ or ‘limited by guarantee’) from the start of the registration process as changing the structure of an incorporated company is complex and very time consuming.
- Failing to check the company name. If you attempt to register an unavailable company name (i.e. one that is already taken by another company), your application will be rejected. You can check the availability of your proposed company name for free using the Companies House WebCheck service or through any online company formation agent.
- Misspelling the company name or not giving it careful thought. You can change your company name after incorporation, but your certificate of incorporation will always display the original name - a real shame if you want to display your certificate.
- Not adding ‘Limited’ or Ltd’ to the end of the company name. Unless you’re setting up a ‘limited by guarantee company’, this is a legal requirement!
- Misspelling the name of a director or shareholder. It’s easy to change a director’s name, but you have to file an annual return to change a shareholder’s name, and it’s not possible to amend a shareholder’s name on the memorandum after company formation.
- Entering an incorrect date of birth for a director. It’s not possible to change a director’s date of birth because it is the one piece of personal information that never changes. If you make a mistake, you will have to terminate the director’s appointment and then reappoint them with the correct information.
- Location of the registered office. Your company’s registered office must be situated in your chosen jurisdiction of incorporation: either England and Wales, Scotland or Northern Ireland. You can’t register a company in the jurisdiction of England and Wales, for example, with a Scottish address as the registered office.
- Missing articles of association. Failing to indicate which model articles you wish to adopt (or failing to include a copy of any altered or bespoke articles) will result in a rejected application.
Mistake 2: issuing too many shares
All of the shares your company issues must be taken by the shareholders, who are legally required to pay the nominal value of their shares if the company goes bust.
The idea behind issuing shares is to reduce your personal liability for company debts, so you should only issue the number of shares you need, or think you may need in the near future. You can always issue more if circumstances change further down the line.
Additionally, you should keep the nominal value of each share to a reasonable sum - £1 is the norm.
Mistake 3: allotting shares inappropriately
If your company has more than one shareholder and you want to retain majority control of the business and keep most of the profits for yourself, you must take over 50% of the issued shares. This may seem obvious enough, but you’d be amazed how many people get it wrong.
It doesn’t matter if you personally hold the biggest percentage of shares compared to every other shareholder, if you do not own more than 50% of the business as represented by its issued share capital, you do not hold majority control. This means that the collective voting power of the other shareholders will outweigh your percentage of ownership, which could be detrimental to you personally, as well as to the direction of the business as a whole, so do tread carefully when allotting shares to other shareholders.
To help sole traders and partners get the new tax year off to a great start, we've teamed up with HMRC once again to deliver a webinar on the hot topic of business expenses.
If you’ve ever felt confused about what you can and can’t claim as a business expense, this webinar will come in very handy. It includes:
- an introduction to allowable business expenses
- common business expenses (including motoring costs and business use of home costs)
- simplified expenses
- expense record keeping
You can check out the recording of the webinar below:
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