Thursday, 8 December 2011

How to deal with late payments

In the current economic climate, late payments are becoming commonplace. Whilst payment terms have never been too favourable to suppliers, they are getting more and more unattractive, with 60, 90 or even 120-day payment terms making an appearance these days. And despite these terms being already in the clients' favour, it is quite common for the actual payment to be late. After all, it's quite convenient for the client to keep the money in their account for as long as they can, earning interest.

Needless to say, this is quite annoying for the supplier, who has to chase the payment through endless phone calls and e-mails, wasting time when instead they should be working and earning money. But the real problem is with cash flow. Even if translators have very few outgoings compared to other businesses, they still need a certain disposable income every month to pay for their bills, food, etc. At the end of the day, you can't tell your phone company "I'll pay your bill when my client pays me".

And this is even worse for small translation companies which might have significant outgoings, such as rent, staff salaries and paying their own freelance suppliers. Late payments and the subsequent problems with cash flow could soon become a huge burden which could potentially send the business into bankruptcy.

Not all is lost, however, as there are ways you can protect yourself against late payments.

First of all, if you are contacted by a new client, do your research before accepting a job. Check that the company is genuine and find all their details on the Internet, such as address, e-mail address, website, etc. If it is a member of the public, it might be more difficult to check that it is a genuine enquiry, so be extra careful.

It's also a good idea to check with other translators if they have worked for that client and get some feedback. In any case, what you should always do is look up the company in websites such as Payment Practices, the Black and White list in GoTranslators, the Blue Board in Proz or many other similar sources that will tell you if the client is a bad payer.

Also, protect yourself by signing some Terms of trade. It could be your terms, or their terms, but make sure you understand them fully and you both agree on them.

If, despite doing all this, the new client turns out to be a bad payer, or one of your regular clients starts paying considerably later than usual, you should always start by chasing the payment politely. After all, it can happen that invoices are misplaced or forgotten about, or simply not received. We are all human and can make mistakes, so I would advise to start on the assumption that it is a genuine error.

If you don't get a reply to your initial reminder, or they say they are going to pay but haven't done so within a week, it's a good idea to send them another e-mail or phone them directly. How they react to this second contact is crucial: if they don't reply or start giving excuses such as "the cheque is in the post", "the person who deals with the payments is on holidays" or "the system is down", be very careful. Excuses are just a delaying tactic, and lack of response obviously means that they don't care.

In that case, you can seek cover in the law. For instance, in the UK, clients who pay late must by law pay penalty interest and compensation. For debts of less than £1000, the penalty is £40, rising to £70 for larger debts. Then interest is charged at 8% over the Bank of England rate. Whilst many translators choose not to apply this charges, it is useful to know that it is your legal right to demand them if the client exceeds the payment terms set at the beginning of the project/on the invoice.

If after that second contact you still haven't received payment in, say, two weeks, it is certainly advisable to send another invoice with the compensation and penalty interest added to it. Alternatively, you can contact the client once again stating that, if you haven't received your payment by X day, they will be hearing from your debt collection company the next day. Most clients usually pay at this point.

The last resort is, of course, sending a Recorded Delivery letter stating your intention to go to court (Small Claims court in the UK).

Once it gets to this point it is very likely that you will lose the client, but at the end of the day you have to think that A CLIENT WHO DOESN'T PAY IS NOT A CLIENT.

1 comment:

  1. Thanks for these!! It's always good to have a checklist :)