How to deal with overdue invoices in 3 steps
Benjamin Franklin once said, “nothing can be said to be certain, except death and taxes.” If he was a freelancer or business owner today (and indeed if he was living), he’d include overdue invoices in his statement for they’re also a certainty.
Struggling to get your invoices paid? It probably won’t surprise you to learn you’re not alone. On average, freelancer invoices are paid 18 and a half days late. Some invoices don’t get paid ever. That’s the reality. What’s the solution? Well, there are best practices you can follow to deal with overdue invoices. Following the right processes can get you paid sooner - and they can be the difference between getting paid at all.
Here’s how to deal with overdue invoices:
Step 1 – Send an email, pick up the phone and be nice
First of all, you should chase invoices. But, you should do it courteously.
A casual reminder by email is the first step. If you want to do this the smart way, automate the process. Solna lets you schedule email reminders before invoices are due, and after the dues date, to give clients a nudge and help you stay on top of things. This reduces friction, frees up your time and allows you to relax knowing the process is under control. Easy.
If you’d rather pick up the phone, that’s fine too, but remember the last thing you want is to run around in circles chasing invoices.
By now, you might have already tried this approach and sent out what feels like a thousand emails. We say give it another shot but change tact slightly. Try emailing your contact for “help” in getting the invoice paid. In your email, ask your contact to “walk your invoice down” to accounts and see if that gets a response. People are always willing to help, right?
If you don’t receive a meaningful response to your courteous reminders, it’s time to be a bit more formal in your approach and try twist your client’s arm.
Step 2 – Being nice not working? It’s time to get formal
As a freelancer, you’ll probably be used to being polite and friendly in your communication with clients. Getting formal might sound daunting because of this, but you must if you want to get paid anytime soon.
You should be more formal in your approach after you’ve exhausted your patience in trying to get your overdue invoices paid. It kickstarts a different process that feels more urgent and is more likely to get a response from your client.
The next step is to send a Letter Before Action or Late Payment Demand. These are both legal documents you can write yourself or with a solicitor’s assistance. They warn the debtor of court action if the debt is not paid soon.
With a Late Payment Demand, you can also claim interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998. If your invoices are overdue by more than two months, it might be worth considering this action.
Send your letter via email and post. If you do send it by post, send it signed for. This way you can track the letter and guarantee its delivery.
Step 3 – Exhausted standard communication? It’s time to go legal
Still not got a response? It’s time to turn up the heat. It sounds drastic, but at this stage you need to take legal steps to get paid. This is normal practice for freelancers today who are increasingly chasing late payments.
The first step is to stake your claim in the small claims court. The process of submitting a claim is simple. Money Claim Online (MCOL) is HM Courts & Tribunals Service online submission service. You pay a modest fee and the process is completely online. The portal is easy to use and lets you upload any documents.
It takes around 30-minutes to fill in the form. Once submitted, the debtor will receive a letter from the court with your intention to sue a few days later. This will see through your original notion to take them to court. It’s highly likely they’ll settle faced with this.
And if they don’t? The court will decide in your favour, all being well. Good luck!
PS - Many overdue invoices go unpaid because freelancers don’t vet the clients they work for. To avoid the issue of overdue invoices in the future, consider credit checking clients before working with them. Solna gives you access to your clients' credit scores and limits so you can manage your risk more effectively. How good is that?
Solna is the smart invoicing tool that creates beautiful custom invoices, sends automated reminders, and even checks up on your customers’ credit scores. It’s FREE! Sign up now.