The number of self-employed workers has been on the up in the UK since 2001 and they now account for around 15% of the working population. But despite it becoming such a common way of working, one major problem persists and makes freelancers go through hell: late payments. We wanted to understand a bit more about late payment practices, clients’ attitude about it and the effect it has on freelancers’ lives. We posted a short survey to let people share their stories - and after almost 100 responses from a range of freelancers who agreed to share their crazy invoicing anecdotes - here’s what we found out!
So we can see it’s an issue...but who is making these late payments? Whilst it looks like generally the worst offenders tend to be the bigger businesses, a few people were adamant that smaller businesses cause more headaches - and overall both small and big companies are failing to pay on time. But only one type of company got a particular shout out for good behaviour...
“The best are the public sector organisations – Ofcom, the BBC, Channel 4; there is a clear cultural difference between public and private sectors”
Big and small, there are definitely some trends in the ways companies respond to being asked about a late payment (and it’s not a glowing report)... Just 19.1% of freelancers said that they get an apology from clients when there is a late payment - with 40% of clients just either not responding or seeming to care about the problem. 21% of companies make excuses or lay the blame on the accounting department - but perhaps most importantly 19% of the freelancers feel like there is an abuse of power and disrespect coming from the client.
“Individuals are apologetic and lovely, but accounts department couldn’t give a damn. (...) I think in some companies it’s actually company policy to pay invoices late.”
The general feeling is that clients don’t see freelancer’s payments as the equivalent of their own payroll, or take into account that this money puts food on the table and pays for daily expenses. They usually make excuses we’ve all heard before: “Sorry the accountant is only in on Fridays”, “I think it slipped through the net”, “Sorry your invoice doesn’t appear to be in our inbox , can you send it again?”, “Sorry it went to spam, I’ll get this looked at now”...
Sometimes freelancers have such a hard time chasing up invoices that they end up writing them off altogether, and lose money on jobs that have been delivered. One third of freelancers had to write off some invoices and of those who wrote off invoices, the average amount per year £2,380! The worst case shared is a freelancer that writes off £12-20k each year!
And despite freelancing being so common, it seems that some of the laws are a bit behind too...
“My accountants won’t let me write them off or claim as unpaid because the line of work I do (animation) isn’t a well documented industry, so tax laws are harsh.”
These insights seem to reveal a clear lack of understanding and empathy from the companies hiring freelancers - but to see whether it was a case of people making a mountain out of a molehill, we asked people how late invoices actual effect their lives:
“Even though my day rate is high, annually I earn as much as a waitress. Clients don’t appear to understand that their money literally puts food on the table.”
“I had a large, national chain suddenly decide they didn’t like the work several months after signing it off and refused to pay. I was on maternity leave at the time and so relying on this chunk of money to come in. It was incredibly stressful. It makes you want to quit.”
“I schedule my life and bills around those payments. More than once I’ve gone completely broke and still had to work. No food, just enough for transportation."
“It’s worsened my anxiety and contributed to mental health problems”
So in summary...
Late payments are a universal problem when you are a freelancer, and can come from any kind of company. They all find it unfair that they should expect to be paid late (or not paid at all) when no other profession would accept such a thing. A lot of companies defend themselves by blaming their finance department and only a few of them take the problem seriously - leaving lots of freelancers feeling there is an abuse of power coming from their clients. The issue is so bad that some freelancers look for providers of invoice financing and a lot end up writing off excessive amounts of invoices - and having their lives seriously negatively impacted.
A problem that shouldn’t exist
This is such a surprising problem given the prevalence of freelancing in the modern workplace and unnecessary problem considering the rise of instant online payments tools and better financial software at companies. In our opinion there’s a serious disconnect between company processes and regulation around freelancers - with companies reticent to change despite benefiting from a more mobile workforce. Awareness needs to be raised on the fact that freelancers actually depend on their work money just as any worker depends on his payroll!
Changes we need in the freelancing world
There is a real need for development in either tech, finance or HR to improve the relationships and operations between freelancers and their clients. On one side of the fence, this revolution is already underway with companies like Coconut Finance, Monese or N26 by designing business bank accounts tailored around freelancer’s needs. But we think there needs to be an big change on the clients’ side too - both in terms of attitude and practice. Since late payments come with monetary benefits for companies, we don’t see it being likely that all will adopt fairer ways of working out of the kindness of their hearts. Instead we believe there needs to be a government-led initiative to drive change, for example, a trusted third party to whom freelancers could report companies making late payments to create a sort of credit check, or financial penalties. To enact this change we have launched a petition to ask the government to look at invoice payments.
You can read more and sign the petition here.
A special thank you to all freelancers that took the time to respond to our survey and shared their stories.