Even though it’s sad to say, how to collect unpaid invoices is a hot topic amongst freelancers. Both new and pro freelancers have to deal with it and chase clients regularly, sad story. It's essential to make sure that you get paid for the services you provide, but sometimes, clients may fail to pay their invoices on time.
When an invoice is due, and it has not been paid, it can be frustrating and stressful, but there are steps you can take to deal with this situation. Unfortunately, late payments are common in the freelancing world, and it's not always a reflection of your work or reputation. Clients may have various reasons for failing to pay their invoices on time, such as cash flow issues or internal delays.
But hey, we hope that this guide helps you to deal with unpaid invoices and encourages you to take action when an invoice is due, and it has not been paid: You got this 💪
1. Send a friendly reminder
We know it’s frustrating but yes, even in situations like this, we need to try to stay friendly and avoid serious confrontation. So start with a friendly reminder to the client about the unpaid invoice.
You can use an invoice generator or create an invoice online with Afloat to send a professional-looking reminder to your client. In the reminder, be sure to include the following details:
- The original invoice number
- The amount owed The due date
- A polite request for payment
- If you choose to send the invoice reminder via an email, make sure to request a read receipt, so you know when the client has received it.
2. Follow up with a phone call or email
Chances are your client won’t react to your friendly reminder (yes, even though it was very friendly many will decide to keep ignoring it 😑 so it's essential to follow up with a phone call or email.
Make sure to reiterate the details of the unpaid invoice and ask if there are any issues preventing the payment. At this stage, try to still keep the tone polite and professional and avoid being aggressive or confrontational.
💡 Idea You might want to already notify your client that you will apply a late payment fee due to the unpaid invoice, but that you won’t add the extra fee if the invoice is paid within the next 24h.
3. Apply a late payment fee
At this stage, if your client still fails to pay their invoice, applying a late payment fee for the overdue invoice is more than fair.
Think of late payment fees as a deterrent for future late payments, and they can help cover your costs for the additional time and effort required to chase unpaid invoices.
Important note: make sure you always include this fee in your terms and conditions and in the original invoice. You can use Afloat to create your invoices online and add you late payment fees in the ‘notes’ section of your invoice (this is a component you can easily add to your invoice). This way you’ll be rest assured that the client is aware of it from the beginning.
4. Consider legal action
If the client continues to ignore your reminders and fails to pay their invoice, you may need to consider legal action.
Before taking any legal steps, it's essential to seek legal advice to understand your rights and the process involved. Taking legal action can be a time-consuming and expensive process so we recommend taking it as a last resort and only pursue it if other options have been exhausted.
5. Charge interest on unpaid invoices
If the client still fails to pay their invoice, you can charge interest on the amount owed. Charging interest on unpaid invoices can provide an additional incentive for the client to pay promptly and can help cover the cost of the additional time and effort required to chase unpaid invoices.
For example, in the UK, businesses can charge interest on late payments at a rate of 8% plus the Bank of England base rate. Be sure to include details of the interest charge in your terms and conditions and the original invoice.
It's worth noting that before applying a late payment fee or charging interest, it's best to first communicate with your client and understand the reasons behind the delay in payment. Sometimes, there may be genuine reasons for the delay, and it's best to work with your client to find a mutually agreeable solution.
Remember to keep a friendly and professional tone throughout the process, even if you're frustrated or upset. A positive and constructive approach is more likely to lead to a positive outcome.
💡 Idea You might want to reach out to some online freelance communities to ask for support, guidance, further ideas and recommendations. Twitter, Quora or Reddit might be great communities to explore and connect with other freelancers who have experienced a similar situation.