Debt collection. It’s a term which often invokes the notion of a murky underworld where burly henchman terrorise blameless innocent types, usually of a slender frame; they are often grabbed by the collar and lifted five inches off the ground.
However, if you’re a contractor or freelancer who’s owed money which is not forthcoming, how do you go about collecting it in the most civil manner possible?
Before you begin working for a client it is crucial that a detailed job specification document is drawn up and agreed by both parties. This should include precise details of the duties or tasks you must complete, the timescale for the work, and the exact nature of your role. You should also make sure you have a written agreement detailing when payment is due – and exactly how much.
In drawing up a job specification document, it is crucial to be precise. The following is a bad example for serving a salad:
In essence, a job specification document should be written as an idiots guide that assumes no prior knowledge of the contract. When your work is done, and payment is due, remember to send the client a reminder.
If you want some tips You can download this useful guide to producing a job specification document.
When you send an invoice, it is customary in some industries for the client to pay up before the end of the following month. In effect, that leaves a possible credit period of 60 days. When there isn’t an agreement or custom in place, the law stipulates a default credit period of 30 days.
The credit period begins either on the day the work is completed (or when the goods are delivered), or the date when the customer receives a notice of when the payment is due – whichever of these is the latest.
Okay. So, you’ve done the job as per specification, but the client is reluctant to part with the money due for your coffers. The deadline has been passed. There’s only one course of action you can take: Frogmarch them straight to court and build up a reputation as a ruthless ball-breaking contractor who won’t ever let payment become overdue without a courtroom battle. That’ll learn ‘em!!
To coin an incredibly annoying phrase, ‘calm down dear you’ll only make it personal.’ Before getting the courts involved, or sending round the bailiffs, speak to the client and ensure they understand the situation. Keep everything civil and maintain a calm professional approach. It’s far better to receive your money directly without getting a third party involved otherwise word may get round, rightly or wrongly, that you are unjustifiably impatient when it comes to getting paid.
However, if you’ve done everything you can to speed up payment and still the client is showing no inclination to hand over the money, then it’s time to get assistance.
You can recover the money owed through the courts or via a debt-collecting agency.
Legal action should really be a last resort for a freelancer or contractor. Before you involve the courts, make sure that it will be cost-effective, and ensure that your customer is able to settle – otherwise you could be wasting money on a non-recoverable debt.
Debt collecting agencies are perceived by many as legalised thuggery. And let’s be honest, they’re hardly affable shy and retiring types, but they exist for a reason. When you’ve tried every other available option to recover a debt, you can be fully justified in employing the services of a debt collector. To maintain a clear conscience make sure you select a reputable firm. It’s well worth checking out Creditsafe Ltd who are the only debt collecting agency approved by the Professional Contractors Group (PCG).
Before you take any action in recovering debt, make sure you have a good chance of success. The last thing you want to do is spend money chasing a client who simply can’t pay. There are a number of ways to gauge the ability of a customer to pay an outstanding fee. If you’ve developed a decent relationship with the client then you may have an idea. Alternatively, if your client trades as a limited company then you pay for a credit report.
Employing a third party to recover really should be a last resort. If you are too hasty in employing the services of a debt collector, or too quick in going ahead with court proceedings, then your reputation could be somewhat tarnished when word spreads. Secondly, if the client is likely to have work in the future, then they’re almost certain to look elsewhere.
The ideal approach is to ensure good communication and detailed documentation is established from the very beginning of a contract. When you know that you’ve done everything by the book, and you’ve got the records to prove it, you can be rest assured that if a third party is required, you are in a strong position to receive what you are due.
