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.

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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.

Which football club’s finances need a kick-start?

Swansea and Southampton top premier league of invoice payment!

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As this year’s football season reaches an end, here at CreditHQ we thought we’d take a look at how good the top football clubs are at performing where it matters – in the payments department!

Small businesses wait on average, 72 days for payment of invoices, and our analysis last year showed the average overdue invoice to a small business was worth a whopping £6,142. 

The Payment Premier League was compiled by combining figures for payment performance and credit risk.

“If a small business wins a contract with their local football team then it is easy to let the heart rule the head, and just go ahead with the work regardless – people love the idea of working for the team they support,” said Martin Campbell. “But our analysis shows that just because a team is good on the pitch, it doesn’t necessarily follow that they will be as strong when it comes to paying invoices on time.”

“Winning a major contract with any sizeable local company is a big deal for a small business, but few would think to run a credit check. Yet the average time for a small business to be paid is 72 days, a period of time which could be seriously problematic for a small business if the figures involved were big enough.”

Premier Payment league infographic

Sunderland and Crystal Palace were the worst performers on our payment premier league, so if you’re thinking of doing business with either of these teams, follow these simple tips to ensure you’re taking the right precautions to ensure you stay on top of your business cash-flow:

  • Stay on top of your invoice process to get invoices out on time.
  • Follow up before the invoices are due.
  • Chase invoices when due and always charge interest on overdue invoices (or issue a letter of intent).
  • Review payment terms for this company, including payment up front if you are really worried about the impact of late payment.
  • For major concerns about a customer’s financial health, don’t be afraid to walk away from a deal.

Check out who you’re doing business with at www.credithq.co.uk

An Egg-cellent offer this Easter week!

The long weekend might be over, but we’re extending our Easter special offer – Access CreditHQ FREE for one month!

Now we’ve hit the second quarter of the year, it’s a great chance to reflect on the first few months of the year and review the businesses with whom you’re trading.

Are your suppliers paying you on time? Might it be time to increase or reduce the amount of credit you’re extending to a particular business? Has your business’ credit and payment score improved and you’d like to show potential customers this?

CreditHQ can help improve your cash-flow and credit management, and ensure you’re working with the companies that are best for your business. If you know you want to work with a particular business but know in advance that they’re not likely to pay you until 45 days, you can plan accordingly and make sure you’ve got enough cash in the meantime for other purposes.

So this Easter, we’re offering you access to CreditHQ’s Standard subscription free of charge for one month! Simply enter the code EASTERHQ16 in the voucher code box*.

You’ll need to enter your card details, but don’t worry –  we won’t charge you a penny for 30 days (and if you find you’re not using CreditHQ, simply cancel anytime within the first month to avoid the £25 monthly subscription fee).

So hop to www.credithq.co.uk and start checking out the best businesses you should be working with!

*voucher code valid until 30 April.

New CreditHQ partnership with The Formations Company, aims to address the growing problem of late payment to small businesses

Small business founders registering their business with The Formations Company, will now be offered access to CreditHQ when they form their new companies, allowing them to check the financial health of the suppliers and customers they invoice, and know whether those trading partners are likely to pay on time.

“Late invoice payment is one of the biggest reasons for the cash-flow issues that many small businesses are facing in 2015,” said Martin Campbell, Managing Director, Ormsby Street. “But most small businesses don’t think to check on the financial health of a customer or supplier. Making CreditHQ available to customers of The Formations Company not only provides an easy way to check this but will also recommend whether a company is likely to pay on time or not.”

The Formations Company is the most cost-effective way for a new business to form and has helped more than 100,000 UK small businesses form since its launch in 2009. It offers a range of extra services from a free consultation with an accountant or web developer to £25 free credit for business cards and stationary. The addition of CreditHQ to this suite of services looks to protect small businesses from late invoice payment and the cash-flow issues that can bring.

CreditHQ uses data from seven million company records to check credit status and general financial health, and uses a traffic light system to advise small businesses whether a company is likely to pay them on time. It also provides regular updates on credit ratings, so a small business will be kept abreast of any changes in a customer’s ability to pay. 

“Forming a business can be bewildering, so we want to provide our customers with the very best services and tools to help them as they start their business journey,” said Piers Chead, CEO, The Formations Company. “CreditHQ absolutely falls into that category. Late payment of invoices is a major issue for SMEs, so a free tool that enables them to check the financial health of potential clients before beginning work with them will be invaluable.”

For more information, or if you’re ready to set up your limited company: https://www.theformationscompany.com/

Ormsby Street chosen as a ‘Credit Today Awards’ finalist!

We’re thrilled to announce that we have been picked as a finalist for the Credit Today Awards – in the ‘best use of technology/credit decision making’ category!

Now in their 16th year, the Credit Today Awards celebrates success and innovation of numerous companies working within the credit sector, with this year’s finalists ranging from startups, such as ourselves and business loan startup, Iwoca; to traditional banking institutions such as Lloyds bank and RBS.

Ormsby Street is the software-as-a-service company behind CreditHQ, which uses data from seven million company records to check credit status and general financial health, and uses a traffic light system to advise small businesses whether a company is likely to pay them on time. It also provides regular updates on credit ratings, so a small business will be kept abreast of any changes in a customer’s ability to pay.

To see how your business appears to others, and to check for FREE how your trading partners are doing, register on http://www.credithq.co.uk to get started!

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

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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.

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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

 

 

 

6 ways to avoid bad debt on Debt Collection Awards day!

It’s the “Debt Collection Awards” today – who knew there was an awards ceremony for that?

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To maintain a healthy business and avoid bad debt, not only do you need to get paid for the goods or services you provide, but you also need to get paid on time. So, to reduce the risk of having to call the debt collectors, here are some tips:

1) Check your customers’ creditworthiness – you can use CreditHQ (it’s free), to search for the companies you trade with and find their credit worthiness. The lower the credit indicator, the greater the risk of a company facing financial difficulties.

2) Set credit limits – often smaller and younger companies will have a lower score, which doesn’t necessary mean they won’t pay, but you can consider setting a lower credit limit until you are confident that they can and will pay on time.

3) Know when you should get paid – manage your cash flow by forecasting when invoices are due and keeping an eye on any changes in payment patterns and delays with your existing customers.  For new customers who you are yet to trade with, check when they are likely to pay you. Search for the company on CreditHQ and look at the payment indicator – the lower the number, the greater the risk of a company paying their bills late.

4) Monitor the companies that you are trading with – you can set up an account on CreditHQ (did I mention, it’s free!), and create a ‘Watch list’; you’ll then get alerts when credit or payment indictors change for the companies that you are watching, so you’ll know if who you might need to chase for payments.

5) Give clear terms – make your terms visible to your customers by publishing them on your website, on your invoices and send a copy to your customers upfront. Include a clause stating that you continue to own the goods or services until they have been paid for.  You could offer discounts for payments made within 30 days, and charge interest on anything over (you’re legally entitled to), but if you chose to do this, make sure your terms specify this.

6) Manage your invoicing processes:

  • Send invoices on time.
  • Make sure you find out the right person or department to send the invoice to, and request an acknowledgement that it has been received.
  • Keep up to date records on who owes you what and when.
  • When an invoice is due, chase it.
  • Stop supplying customers who don’t pay on time.
  • Resolve any disputes quickly – payments are usually withheld until the customer is satisfied.
  • If you have customers who regularly pay late, increase the prices that you charge them, or cancel any credit facilities.

If you don’t get paid, even after chasing, then here’s what to do next..

Before you go down the debt collection path, try one last time to recover the debt yourself, phone and write to the customer and let them know that this is your next course of action, as this may be enough to get them to pay. Also try and find out why they haven’t paid, as it may be a problem with their accounts system, or they may be having problems, and you could agree a repayment schedule.

Decide if the amount is worth pursuing – it may not be worth your time or the cost to collect, so let it go and move on.

4105722502_a442444bb9_mIf you do decide to pursue the debt, then use a debt collection agency, or take legal action using a solicitor or via the small claims court (https://www.gov.uk/make-court-claim-for-money/overview). A reputable debt collection agency can chase late payments in a professional manner, without alienating the customer.

Make sure you check the costs – there may be a flat fee or a percentage of the debt recovered, or both, and ask about additional charges.

Don’t delay chasing any bad debt and good luck. Please do remember to reduce your risk though, by knowing your customers better – use CreditHQ to check them out!

If you on the other end of the debt collection process, and are being pursued by debt collectors, then here is advice on how to deal with it: http://www.money.co.uk/article/1009025-how-to-deal-with-debt-collectors.htm