Invoicing and Credit Control

Suggestions on How to Become Established as a Freelance Translator

Invoicing and Credit Control

Apart from marketing your services effectively and delivering quality work, on time, the next biggest challenge is getting your customers to pay you fully and on time. Many businesses have folded due to failing in this department.

If you are VAT registered, strict rules apply as to which information needs to be included on your invoices. The HM Revenue & Customs website (www.hmrc.gov.uk) gives detailed information about this. Even if you are not VAT registered, including this basic information is good business practice and will help you keep track of your debtors.

In big business, companies carry out credit checks on clients to assure their credit worthiness. This is usually not feasible in the translator's daily life. Often the amounts involved are so small that credit checks can't be justified, or you work for private clients where you have to take it on trust (or ask for pre-payment). My personal experience is that about 70% of my customers pay within the seven day period I set them. 10% pay within two or three days. 10% take about 1 month but pay up eventually. Some of the remaining 10% of clients are very reluctant to pay but will pay up once you've sent them a reminder and/or threatened them with court action; a very small number of customers fail to pay. The Small Claims Procedure may be used to try to recover such amounts. Good invoicing practices and proper credit control will avoid most bad debts! Much depends on your attitude. If clients think they can get away with paying late, they will pay late. If your payment terms are “Due Now” or “7 Days Net”, send a friendly reminder after 7 days. If a client consistently pays late, ask for pre-payment. Only really large companies tend to have inflexible accounts systems, most of the clients you will be working with can be surprisingly flexible.

Invoicing Credit Control

To insure your clients pay up, here are some steps you can take:

Devise a professional looking invoice which includes all the relevant details, including how payment may be made and make sure it is correct in every detail.

Invoice promptly on day of delivery.

Clearly state a period within which you expect payment. My own terms are “Due Now” for private individuals and “7 Days Net” for all other direct clients.

There is less flexibility when working for agencies who tend to set their own payment terms and are rarely flexible.

  • State what will happen, if an invoice is not paid within the specified period. I include the following on my invoices: "In accordance with the Late Payment of Commercial Debts (Interest) Act 1998, I reserve the right to charge interest of 8% above base rate on debts that are outstanding after one calendar month from delivery of the invoice. If the invoice is not paid within seven days of the 1st reminder, the compensation of £40 for debts below £1000 or £70 below £10,000 will also be applied as per amendment of above quoted act, dated 7th August 2002." You can read up on this legislation on this site www.payontime.co.uk/legislation
  • If the invoice is still outstanding after your stated period, try sending a mail with a friendly reminder (attaching all the original details) stating a new period within which you expect payment) and/or phoning the client. They may not have received your invoice, lost it or it may not have been passed on to the right department. A lot of the time, the client will come back to you apologizing profusely and you will be paid straight away. If you get no satisfactory response to this first informal attempt, send a written reminder within a week and if you have not received payment within the new period stated, send a second reminder by recorded delivery and a final reminder (also recorded) if the second one brings no results either. The final demand should include details of what you plan to do if the client does not pay his debt - which should be a claim in the small claims court or, if the client is a Ltd. company and if the outstanding debt is greater than £700, a Statutory Demand. I have had to do this only very rarely.
  • One of the most important things to do is to strictly adhere to your own timetable, e.g. if you have stipulated one week for the payment to reach you, you need to get that next reminder out on the eighth day. If your reminder arrives after three weeks, the client is not going to take any of your threats seriously and you are not likely to recover your money. The client must believe that you will take them to court, even if you have no intention of doing so.
    Other preventative steps you might take to avoid late payment or non-payment issues:
  • If you are a member of a translators' forum or other network and you are approached by a translation agency, you can ask your contacts whether they know this agency and whether they are good payers (there are black sheep in every industry). You can also subscribe to special lists maintained to monitor payment practices of agencies.
  • Ensure your clients know what you expect of them. If you expect prompt payment for a large job, tell the client at the outset, in writing (agencies are not likely to take any notice of such a demand as they will usually point out that they have to wait about 30 days for their own client to pay them).
  • Ask clients to pay in advance. I apply this to (mainly private) clients, especially if they live abroad, when you have no chance of recovering outstanding debts easily within the British court system.

    Use Paypal or Transferwise. These options are only financially viable if you have many customers who are willing and able to use them. Adjust your charging structure to take the fees charged by PayPal. Transferwise payments are made straight into your bank account and therefore don’t attract additional charges.

  • For larger orders: Get the customer to sign a 'purchase order' stating their exact requirements, deadline(s) and your payment terms. This should also contain general terms and conditions and cover other matters such as alterations from the original specification, quality standards and who decides how this is assessed, etc. Also allow for invoicing in 'stages' - large orders that are payable at the end of the project are not good for your cash-flow and going overdrawn means you are paying for the money the customer owes you. To give you an example of how important this is: Imagine you quote someone on a job giving a 20% bulk discount because the client claims there will be at least 20,000 words. In the event, the work dries up after fewer than 10,000 words. If there is a purchasing order that clearly states that the bulk price only applies if a minimum of 20,000 words is reached for this assignment, you are in a strong position to claim the additional 20% from your client. If no such agreement exists, your chances are extremely slim.
  • Don't leave it until the last day of the month to write your invoices. To help your cash flow, send the invoice together with the translation. You won’t be able to set your own payment terms with agencies but you can with direct clients. If your terms are “Due Now” and “7 Days Net” you are likely to have a constant stream of money coming in.