Late payments threaten to derail the freelance industry

UK freelancers are increasingly struggling with late invoice payments, with around half admitting they have considered quitting life as a freelancer because of worries over continued late payment, and 46% stressing about having enough cash to live on.

freelancermainimage

Our latest research here at Ormsby Street, also reveals that one in ten freelancers have faced difficulties paying their mortgage or rent because of late invoice payment, and many have turned to family (37%) or even payday loans companies (36%) to cover a shortfall brought about by late payment.

While a fortunate 19% of respondents say most of their invoices are always paid on time, a freelancer’s invoices are paid on average 18 and a half days after their due date. At any one time, a freelancer in the UK is owed on average £5,431.03 in late payments and 79% of freelancers say that cash-flow is the number one concern for their business.

“Every freelancer knows that late invoice payment is one of the biggest frustrations, impacting cash-flow and causing much stress, from paying the mortgage to having enough money to live on,” said Martin Campbell, Managing Director, Ormsby Street. “For a freelancer to be owed more than £5,000 is clearly unacceptable and threatens the emerging freelance economy in the UK, which brings flexibility and work / life balance to so many.” 

The Office for National Statistics revealed in 2015 that 4.55 million Britons are now their own boss and research by the Association of Independent Professionals and the Self-Employed (IPSE) found three in five businesses agree that it would be difficult to operate without hiring freelancers. The Ormsby Street survey of 1,002 freelancers and sole-traders, revealed that 40% of respondents have taken out a County Court Judgement (CCJ) in the last year to chase a bad debt, and more than half say that late invoice payment is getting worse not better.

It remains a problem for many freelancers when it comes to chasing clients over late payment, partly because they do not have the time to spare, but also because of fears this might impact future work with that company.  57% of respondents say they worry that if they chase for payment that client might not use their services again, while two-thirds say they feel uncomfortable and awkward chasing clients for late payment.

“Why should a freelancer waste their own billable hours chasing payment for work that has been successfully completed and is already due for payment,” continued Martin Campbell. “If customers are not willing to pay within the agreed terms then it’s time for freelancers to become more informed over whom they work with, and either ask for payment upfront or even choose to not work with company.”

Special Freelancer rate!

With 49% of freelancers having had to turn down a contract because of concerns over a client’s ability / willingness to pay on time, we’re offering access to CreditHQ for the special freelancer rate of £12.50 for the standard subscription; allowing freelancers to obtain financial insight into every company they trade with. Sign up here to take advantage of this offer

“Freelancing has grown in popularity because of the choice and flexibility it gives people over their career, but its success relies on the prompt payment of invoices, which is not happening enough,” concluded Martin Campbell. “Credit-checking potential customers and partners is straightforward to do and should be done by a freelancer every time they work with someone, to protect themselves against late payment.”

About the research

An online survey of 1,003 freelancers and sole-traders was undertaken by TLF Research in March and April 2016.

CreditHQ, the credit-checking tool built by Ormsby Street, collates credit and trade information from Companies House, Experian and Dun & Bradstreet and presents that information in simple-to-understand credit and payment indicators, so a freelancer can assess which businesses are likely to pay them on time, or after 30 or more days.

Formed in 2014 to take over the operation of the financial data proposition of BCSG, Ormsby Street is developing the next generation of financial data services for small businesses. Its team of high-performing product innovators and software engineers are quietly taking sophisticated financial information and turning it into a next-generation digital tool to help businesses make good decisions about customers, suppliers and themselves.

Late payments force small business directors to take pay cuts

Today’s report in The Times, outlines the increased importance of checking out the financial health of the companies you’re trading with: http://www.thetimes.co.uk/tto/business/workinglife/article4354941.ece

3449416468_fa203c6b5f_o

The latest figures from this story, report that the average UK small business is now owed £32,000, resulting in around £677 per month for each company affected – this adds up to over £8.7 billion in late payment costs for the whole of the UK – forcing one in five directors of these companies to be taking salary cuts.

So, if you run a small business – what can you do to ensure that you don’t become one of these statistics? Check, Monitor and Collect…

Check: KNOW who you’re trading with. By registering with CreditHQ, you can check who your suppliers, customers and competitors are for FREE! The simple ‘traffic-light’ payment and credit indicators quickly show you who has a solid credit rating, and who pays their invoices on time- if both of these indicators are red, it might be worth your while having a look for more secure businesses to deal with. If you do want to find out more detailed information about a company, you can upgrade to the Standard subscription to obtain details of net worth, assets, liabilities, sales, and details of adverse credit events.

Monitor: Keep a watchful eye on those you’re doing business with. Add businesses to the Watch List on CreditHQ and receive alerts when that company’s details change – if they’re beginning to struggle financially, make sure you’re the first to know rather than finding out when they get into deep water.

Collect: Chase your invoices before they become due. If a business you’re monitoring is beginning to experience problems, think about re-negotiating your payment terms with them, or reducing the amount of credit you offer to them the next time you trade with them.

cover

Checking out your trading partners need only take a few minutes, but could save you months of chasing payments and juggling cash-flow, simply because you went into business with someone you hadn’t researched. Plus, it’s free to do and could potentially save you from a pay cut later in the year! www.credithq.co.uk

 

 

 

Your rights with overdue invoices

You’ve worked hard to win a new customer. You’ve worked hard to deliver a quality product/service for the customer. But now the customer is making you work hard to get your invoice paid. That can’t be right, can it? It isn’t right, but there’s nothing you can do about it is there? Wrong. There is! You have rights and you shouldn’t be afraid to exercise them in order to get paid. You’re (probably) not running a charity. You have bills to pay and employees who have families to support; so getting your money is really important. And the government know this so they’ve put in place mechanisms in order to support you in getting paid.

business man and invoice

Payment terms It’s always best to have your own payment terms laid out because these will more accurately reflect the needs of your business and you can set these to be whatever you need. 7 days, 30 days, or 100 days. It’s up to you. However, if you haven’t explicitly given terms to your customer then the default is 30 days and it’s within 30 days that they have to pay you.

Charging interest Once the invoice becomes overdue then you are perfectly entitled to charge interest on the amount owing. This would be either your own rate of interest if you’ve included it within your terms, or it could be the statutory rate of interest, which is 8% PLUS the Bank of England base rate for business to business transactions. Don’t be afraid to do this, because it’s your money that they’re stopping you accessing. You could be gaining interest on that yourself if it was in the bank, or you could be investing it in obtaining further work, and you can’t until they pay you.

Statutory demands If all else fails, anyone who is owed money can make a statutory demand and you don’t need a solicitor to help you. Once the demand is received by the company owing the money, they have 21 days to either pay the debt or reach a payment agreement with you. If this isn’t forthcoming then you can start a winding up order against the company. But hopefully all our customers will pay on time and we don’t need to worry about any of this!

Giving is good! Benefits of charitable giving to your small business

It’s International Day of Charity on 5th September – there are so many ways to support a charity, so why not give one of them a go!

Supporting a great cause helps the charity to continue their life-changing work, and makes you feel that you’ve made a bit of a difference. On top of that, there are benefits for your small business when you give to charity.

Giving to charity doesn’t have to just be about money, it can also include volunteering services or donating stock. All are forms of charitable giving.

annefrank

Giving a donation
If you make a donation and don’t receive anything in return (apart from a good feeling!), then this is classed as a straightforward donation. If you do receive a public thank you or a mention in a newsletter, then that’s fine. Promoting your company’s links with your chosen the charity can help build a positive image too.

If your company donates (it has to be a donation from the company rather than from a sole trader or partnership), you can deduct the value of your donation from your company’s total profits when you calculate your Corporation Tax. For how to claim, visit the HMRC website.

Sponsoring an event

Your company could sponsor a charity event or project, by giving the charity a one off payment or a regular amount.

In return for your sponsorship amount, you may benefit from advertising campaigns or publicity, promoting your company brand or product in conjunction with the event or project you’ve sponsored, potentially reaching a wide audience.

Your business may be able to deduct the sponsorship payments as an expense when you work out your profits for tax purposes. For more information on sponsorship and the tax benefits, visit HMRC.

Giving your time and expertise

Most charities couldn’t operate without their volunteer workforce – it is vital to their existence.

Volunteering your services will give the charity valuable expertise. If one of your employees works or volunteers for charity on a temporary basis or on a secondment, your company can continue to deduct the costs of the employment, including the employee’s salary for tax purposes. (This applies to sole traders, trading partnerships and companies with a trading or investment business). You may also be able to claim other expenses, so for more information visit HMRC.

Giving shares, property or land 

You can’t give shares in your own company to a charity, but you can give ‘recognised shares’ in other companies, land and property as a gift. You can claim corporation tax relief for such gifts, and you can claim relief if the gift is sold to the charity for less than the market value. For more information on how to give, and how to claim tax relief visit HMRC.

Giving equipment or stock

Giving equipment or stock are both considered as ‘gifts in kind’ and you can get tax relief. Company equipment, such as office furniture, computers, printers, cars/vans, tools and machinery all count, but they have to have been used in ‘your normal business activities’ to qualify.

If you donate goods that your business makes or sells – your ‘trading stock’ – to a charity, then you can claim the cost of these goods in your business accounts, reducing your business’s taxable profits by the full cost of the goods. For more information, go to HMRC

Payroll Giving

Setting up a Payroll giving scheme is a great way to help a charity. Payroll giving enables your employees to give to their chosen charity directly from their gross salary, before the tax is deducted, making the donation worth more to the charity. It also allows charities to budget ahead, providing them with regular, reliable income.

The costs of setting up a scheme and the small ongoing costs of running a scheme are deductible for tax purposes and help support corporate social responsibility (CSR) schemes too. For more information, visit the Payroll Giving Centre and HMRC, for how to set everything up.

Giving is good!

So giving is good – not just for the charity, but for your business too!

For more information on what you can and can’t claim, and how to claim any tax benefits, then visit the HMRC and The Institute of Fundraising

Have a look here for more information about International Day of Charity