Commentary: The curse of late payments plaguing freelancers

LONDON: All I wanted for Christmas was… pay my last bills. In time. Without problems, hoop jumping or rabbit brain demands.

No, it’s not the weird version of Mariah Carey’s classic hit that you haven’t heard before. It was the festive wish of freelancers everywhere.

December and January are financially tough months for most, with increased spending followed by the dreaded UK tax return. Even employees who got paid early at Christmas may have to wait six weeks for their next payday.

But at least they know the money is definitely on the way. Nothing scares a freelancer like a vacation message from a customer who owes us money.

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Payments on time

A recent tweet from comedian Katy Brand stated, “An annual reminder to all companies to pay their freelancers before Christmas. If you go on your paid vacation before you’ve got all your administrators done, you can ruin someone else’s Christmas. First, clean up your desk. Then get drunk as often as you want. “

I’m not on a naughty list. I have delivered all of my work on time to the satisfaction of my customers.

But the most important question (which I ask anyone who works for me) is, “What do I need to do to make sure you pay me right away?”

“Just send us your standard invoice, that’s all the finance department needs,” is often the breezy answer. Oh if only!

UK law requires companies to pay their suppliers within 30 days, unless otherwise specified in a contract. But when that long month goes by and payments don’t materialize, so many freelancers start their cash flow nightmare of Christmas.

(Photo: rawpixel / Unsplash)

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A common problem is customers failing to tell us what we need to provide to make sure we get paid (such as an order number or creating an invoice in a certain way). Often times, this information is only released after the invoice is overdue and we are already in tracking mode.

The hassle of getting paid

Then there is the absurd admin. I’ve seen and heard everything. One agency I worked for earlier this year said they needed a character reference from another happy client before they could process my payment – even though I had already done the job.

In the end, FT Money editor Claer Barrett was kindly obliged, but not before being ticked off (politely) for wasting her time.

A higher education institution asked me to send my bank account details on notepaper with a headline (yes, really) and then much later insisted that I fill out the diversity and equality form.

I literally had to tick boxes and reassure them that it was not my practice to discriminate against others for any reason. As good as; The event that I led and in which I could have shown outrageous prejudices was until then a distant memory. This payment was made for £ 100 (US $ 130).

Stuck by paper in a digital age

You might think that in this era of digital payments, the various platforms set up for freelancers and clients would lubricate these payment wheels. So far this has not been my experience.

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(Photo: Nikola Balic / Unsplash)

After finishing broadcasting for a financial institution, the agency eventually activated my payment on a platform called YunoJuno.

Some freelancers use it to apply for jobs and they really like it. But for freelancers like me who are forced to use it once to get paid, it was insane.

Almost two months later, I was scanning copies of my birth certificate and old pay slips to verify my identity and figure out how to fill out a timesheet for a job that lasted 15 minutes.

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The rise of the gig economy means that many competing platforms are emerging, each with their own quirks, no doubt.

The advantage for large companies is that they are secure and outsource the hassle of processing supplier payments. However, these payment platforms offer additional levels of complications, especially when the end customer has no idea how they work.

Many appear to be more geared towards small businesses offering their services than individuals. A freelancer I know said she was asked to produce her “corporate environmental policy,” which consisted of a wastebasket in her kitchen.

Another was asked to log into an e-invoicing system for which he would have to pay a subscription. Pay to get paid, whatever next?

For the most part, I am very happy as a lot of my customers pay me quickly. I don’t have huge overheads like renting an office or employing staff, and I’ve been able to build a savings buffer to solve temporary cash flow crises.

BANES FROM SMALL BUSINESSES AND FREELANCERS

Even so, this problem is the bane of retailers and small businesses today. According to the Federation of Small Business, 50,000 companies go out of business every year due to late payments costing £ 2.5 billion to the economy.

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(Photo: Unsplash / Dylan Gillis)

This also has a significant impact on the mental health and morale of freelancers. Research from IPSE, the self-employed association, shows that we spend an average of 20 days a year tracking down late payments, with 43 percent of us writing off at least one unpaid job.

This may sound extreme, but many freelancers don’t like to complain because they fear losing their jobs in an increasingly competitive marketplace.

According to broker Simply Business, the number of new UK freelancers rose 31 percent in June 2019.

As more and more large companies are opting for the nimble use of freelancers – also because they do not have to grant us a pension, no sick pay, no parental leave or paid vacation – more and more freelancers are asking whether we will get a fair offer for it.

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I understand the need to verify identities to avoid fraud. But some requests are so onerous and silly that they indicate a lack of common sense and consideration from those who ask them.

One-size-fits-all payment processes might work for a certain type of contractor who work by the hour, but they’re administrative hell for freelancers doing one-off work for a fixed fee.

FIGHTING LATE PAYMENT

Ironically, the UK government has been promising action against late payments for ages with no signs of firm delivery. Many freelancers and small business owners hope that the promises made in the Queen’s speech to tackle late payments will bring about change.

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(Photo: Unsplash / Avel Chuklanov)

In the meantime, it might be time to get tough. Under current law, freelancers are entitled to demand late payment compensation and penalty interest for commercial debts.

The fine is £ 40 for amounts up to £ 999 and increases to £ 70 for debts up to £ 9,999 and £ 100 above. The interest is also payable at the base rate plus 8 percent. So a debt that is 40 days late and is worth £ 1,000 would incur charges of £ 79.20.

Freelancers never like to rock the boat. But one of my New Year’s resolutions threatens to charge if customers don’t play fair.

If you or your company are responsible for the livelihood of small suppliers, it is worth making a decision to find out if your own payment system is up to date.

Iona Bain is a freelance financial writer and author of the book “Spare Change: How to Save More, Budget and Be Happy with Your Finances”.

April 1, 2021