This week The Department for Business Innovation & Skills are completing a consultation on implementing an EU directive which they say aims to strengthen the current late payment legislation in the UK. It seemed timely to have some tips on invoicing and collection procedures so you can get paid for what you’ve done in the minimum amount of time.

Getting paid is probably the biggest headache when working for yourself. When you were employed you knew that, whether you’d completed a project or not, you were going to get paid at the end of the month. When you run your own business, completing work and getting paid for it are two completely different things. 14 days, 28 days or even 90 days can go by after you submitted your invoice, and you still might not have seen any money.

So how can you speed up the payment process? Here are some strategies that successful businesses use to get paid on time:

1. Have terms and conditions and/or a contract

It’s absolutely critical to set payment terms upfront. Too many Virtual Assistants rely on verbal agreements when taking on work, and it’s a big mistake to think that it will put off good clients by being upfront about expected terms of payment. Having terms sets the ground rules and means that both parties know exactly what is expected of them. This alone may prevent unnecessary disputes and it’s good practice to make it part of giving any quotation of rates or project costs.

For a particular project where work can be defined, write down your understanding of what’s to be done and by when, and include a provision of when you’ll be paid. If the date agreed passes you’ll be able to call your client and gently point out that the date for payment has passed. If you’re charging for your time, make sure you agree any boundaries on maximum time to be worked before you get to the invoicing stage. There’s nothing worse than having done a huge amount of work for the client to turn round and say they didn’t ask you to do that much.

2. Shorten your billing cycles

Remember, nothing can be paid until your bill gets into the customer’s payment process. For invoicing in arrears, consider billing more than once a month, perhaps every two weeks (or even less). Left to their own devices many clients will take 30 to 60-plus days to pay up but there’s no reason why you can’t shorten your requested terms to e.g. 14 or 21 days. This way, you have reason to call them sooner rather than later to check on a payment and prompt them.  A polite call or email can often pre-empt any payment problem.

3.Make your invoices clear

As a minimum all invoices should include payment terms and due date, date, description, price and total payable and, if you’ve been given the details, don’t forget to add the customer order number. Forgetting it will almost definitely slow your payment down.

However, don’t stop with the bare details. State your intention to charge interest on late payments. You are legally entitled to it and the rate is currently 8.5% (8% above the late payment reference rate)

Encourage your client to pay you electronically by BACS or even by credit card through a system such as PayPal, it’s only a small fee. Make sure you put your sort code and account number on all your invoices – and print “Pay Me Direct” alongside. Despite the joke, cheques really can get lost in the post and they’re not the most efficient way to get paid.

4. Get money upfront

You may want to think about changing how you charge. Offer packages requiring a prepayment, perhaps even offering a discount on standard rates for money paid upfront. For project work asking for an advance can be a strong strategy. Chances are, if you ask for it, you’re likely to get it.

5. Hire a debt collector

As a last resort this is definitely worth it. Once you hire a debt collector then it’s unlikely that you’ll ever work with the client in question again. Then again, if your payment is seriously late (90 days or more), why would you want to? Collection agencies will often take around 10% of the invoice amount, but it’s often only paid once collected and so you will definitely get something back. Once your invoice is this late then having someone else deal with it makes it a less personal issue for you and gives you back the time it’s taking you to chase debts. From experience, once a client is threatened with debt collection the very act of doing so can result in the payment being made. If debt collection after 90 days is also part of your terms and conditions, and you follow through with it to a timetable, it takes any stress of making decisions out of the whole process.

6. Small claims court.

Hopefully, things won’t get this far but when you’ve tried everything else with no joy then you can take your claim for payment to the small claims court, where a judge will then decide what happens. This process is usually for amounts less than £5000 and although it’s not expensive to bring a claim, if your client still doesn’t pay up then you may have to go back to court to enforce it. However, you can represent yourself. There’s more information on Directgov and here’s a leaflet from the HM Courts and Tribunals Service

Remember, you’re in business to make a profit and getting paid is how you pay your bills. It’s your money, not the client’s, and you’ve got a right to it. Don’t be afraid to fight aggressively for what’s yours. For more information and help have a look at Pay On Time. There’s sample letters to use as reminders and calculators for helping you work out any interest payments due.

Have you got any other tips for ways to get paid that work for you in your business. Share with us in a comment below.