Being paid on time is a fundamental part of running a business. Find out how to best prepare an invoice to avoid delay, and what to do if your client does not pay on time.
Base your invoice on the fee proposal and refer to it. You can use the fee proposal as a basis and cut and paste it into an invoice. The more detailed your invoice, the less likely the client will question it.
The invoice should state clearly the date, the invoice number, to whom it is addressed, the fee proposal it relates to, the purchase order it refers to, the work that it covers (if it is an interim invoice), the amount of time you are charging for or the agreed charge for the item you have produced, any VAT (if you are VAT-registered) and any expenses. If you charge VAT, you need to include your VAT registration number on the invoice. You also need to state clearly who the payment should be made to, and the terms for payment. ‘Terms’ refers to the amount of time a client has to pay the invoice. Usually people state the terms as, ‘30 days from date of invoice’, but you might want it to be 14 days. With some clients, 30 days can turn into 60 or even 90 days.
Most people are quite responsible about paying on time. But if they do not pay up, you will need to put pressure on them by sending a statement.
A statement points out the terms on your invoice, notes that the payment is now overdue and asks them to remit payment by return. Base the statement on your invoice and attach a copy of it to make it easier for them to speed the payment along. If you do not get a result from the first statement, send another informing them that you are now adding interest at three per cent over the base (that is the Bank of England) rate for every month the payment is overdue. That usually does it. People hate paying interest on things.
Most clients will pay without hassle, but be prepared for the problem non-payer. You need to be clear how much you value a client before you start to put pressure on them. Would it be the end of the world if they never commissioned anything from you again? Do you really want to deal with clients like this?
If a client ignores your statements, then you should write to them, pointing out that - despite reminders - the bill has still not been paid. Ask them to let you know if there is a problem. If you get no response, and the culprit is a large company, try phoning their accounts department to find out why they are not paying. You could also ring your contact in the company and - slightly apologetically, since it is not their department - point out the problems you are having. Could they possibly have a word with accounts on your behalf?
If this achieves nothing then you may decide to get heavy. You can employ the services of a debt collector or a factor. Debt collectors are nearly always ex-policemen; they are very polite and not at all violent. They do, however, have a wonderful way of leaning on the corporate doorpost and eyeing up the hardware, and they are very persuasive. You can usually expect a cheque almost immediately. They will charge you from 20 per cent to 25 per cent of your money, but it is usually better to have 75 per cent of something than 100 per cent of nothing.
Factors are similar but tend to deal with larger sums. They will, if you wish, take on your invoicing function for you – for a percentage, of course – but they are nearly always bigger than you and probably enjoy hustling for money more than you do, so they are worth considering. In either case, you will need a good paper trail of evidence that the non-payer commissioned the work – hence the need for the purchase order – and that you have done your best to recover the money politely.