Residual Incomes

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Residual Incomes

4 thoughts on “Residual Incomes

    1. In these difficult economic times, some businesses are attempting to stave off cash-flow crises by paying invoices later than before. According to debt-recovery solictors Lovetts, businesses are putting cash flow before customer relations to keep afloat. As illustration, this week it was reported that SMEs (small and medium-sized enterprises) are owed £33.6bn in late payments.

      This is bad news for freelancers, who often have their own cash-flow balancing act to negotiate. However, Lovetts is finding that suppliers, such as freelancers, aren’t waiting as long as they used to before chasing up payment. In 2010, the average length of time between invoicing and requesting a “letter before action” (LBA) was 72 days. This year that has dropped to 68 days.

      An LBA is issued to get a response from a client before legal steps are taken. (You may find it useful to know that an LBA has an 80% success rate in getting invoices paid.)

      “This is the third quarter in a row that the time between invoice and a threat of legal action has contracted,” says Charles Wilson, chairman and managing director of Lovetts. “ It seems that the patience and forbearance shown by businesses has just about run its course. Debt is debt, no matter who the customer is. This is quite a reversal on 2010, when businesses were giving customers much longer to pay before action was threatened, in a bid to maintain good relationships.

      “However,” he continues, “there is still much more room for businesses to sharpen up their debt-management strategies and show [clients] they mean business when it comes to late payment. It’s all well and good threatening legal action, but firms need to demonstrate that they will pursue a claim through the legal system or they are in danger of crying wolf.”

      He is, obviously, talking about business, but it can easily be applied to freelancers as well. So, if you’re having trouble getting paid in a timely fashion, it’s worth visiting the government’s Business Link website businesslink.

      It recommends putting your terms and conditions of payment on all your invoices. It also explains that you have rights under late payment legislation to add interest and debt-recovery costs onto late payments. Take a look to find out more.

      Combined with this research, 28% of freelancers in the UK are vulnerable to cash flow pressures due to tardy clients paying later than ever before according to a survey by PCG, the UK’s biggest organisation representing some of Britain’s 1.56 million freelancers.

      The research surveyed 182 freelancers over the last month. On a positive note 60% of those involved did confirm that they were always paid on time, however a further 10% felt that whilst the problem of late payment was not getting worse, it did remain an obstacle for one person businesses as it always has been.

      A spokesperson for PCG commented:

      “The Bacs figures and the ongoing campaigns from organisations such as the Forum for Private Business show it’s clear that late payment issues hit all small businesses. Our survey confirms that too many freelancers unfortunately face this same issue.”

      Freelancers who are members of PCG should head to the PCG to check out the guide to credit management which also handles this issue in detail.

      Are you being paid later and later? How are you handling it? We’d like to hear your experiences at Freelancing Matters so get in touch by commenting on this story.

      late payment strikes

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