How IT contractors can handle clients who won’t pay up

In the world of IT contracting, you get to be your own boss, set your hours, and enjoy the freedom that comes with freelancing. But there’s one problem most contractors will face at some point—late or non-payment from clients.

But don’t worry, you’re not alone! UK freelancers face this issue often, and there are practical steps you can take to sort it out without too much stress. So, let’s talk about how you can handle late-paying clients and what to do if they don’t pay at all. Plus, we’ll share some tips from UK government resources that can come to your rescue.

Why late payments happen (and yes, they will happen)

First off, why do clients pay late? There are several common reasons:

• Admin errors: Maybe someone in accounting forgot to click “send” on your payment.

• Cash flow woes: Your client might be going through a tight patch and struggling to pay bills.

• Disputes: Sometimes clients hold back payment if they’re not 100% happy with the work. Communication here is key.

• Deliberate delays: Unfortunately, there are some clients who will try to push their luck and delay payments—banking on freelancers being too busy to chase.

But late payments don’t need to be the end of the world. Let’s break down what you can do to get things moving.

Common questions about late payment (and how to tackle them)

1. How long can a client legally delay payment in the UK?

In the UK, unless otherwise stated in your contract, clients have 30 days to pay invoices for services. This can be extended to 60 days for business-to-business transactions but only if both parties agree to it.

If a client exceeds this deadline, you can start charging interest on the overdue amount under the Late Payment of Commercial Debts (Interest) Act 1998. That means you can legally charge 8% above the Bank of England’s base rate.

2. What can I do to encourage on-time payments?

First things first—communication is key. Send polite reminders as soon as the payment becomes overdue. Sometimes, all it takes is a nudge. For example:

“Hi [Client Name], just a gentle reminder that Invoice [#1234] was due on [date]. Could you kindly confirm when I can expect the payment?”

If that doesn’t work, consider following up with a more formal email, including any late payment terms outlined in your contract. And if you don’t have late payment terms in your contracts yet, now’s the time to add them.

Another good strategy is to request a deposit upfront (usually 25-50% of the total fee). This at least secures part of the payment before work starts.

3. What legal action can I take if a client refuses to pay?

If the friendly reminders aren’t doing the trick, it’s time to bring out the Letter Before Action (LBA). An LBA basically tells the client that if they don’t pay within a specified time (usually 7 to 14 days), you’ll be taking legal action.

For unpaid invoices up to £10,000, the Small Claims Court is your next step. You can file your claim through the Money Claim Online service. Anything above £10,000 may require legal advice, so if you’re in that position, it’s worth consulting a solicitor.

4. Are there UK government resources that can help me recover payment?

Yes! The UK government is on your side. Here are a couple of key resources you can tap into:

• The Small Business Commissioner (SBC): The SBC is designed to help small businesses (like yours) resolve payment disputes. You can make a formal complaint, and they’ll work on your behalf to chase down your overdue invoices.

• GOV.UK Late Payment Advice: This site offers practical steps on how to claim interest, handle disputes, and even recover reasonable debt collection costs.

5. How can I prevent late payments in the future?

While you can’t always avoid it, there are a few strategies to protect yourself going forward:

• Use solid contracts: Always have a contract in place that clearly outlines payment terms, including when invoices are due and any penalties for late payment.

• Vet your clients: Before starting work, especially with a new client, do some research. Ask other freelancers about their payment habits or use services like Creditsafe to check their financial stability.

• Automate invoices and reminders: Use invoicing software like QuickBooks, Xero, or FreeAgent to send automatic reminders before and after the due date. This can save you a lot of hassle in the long run.

Step-by-step: What to do if your client pays late

1. Stay cool and professional

Yes, it’s annoying, but blowing up at your client will likely backfire. Start with a polite reminder email (or phone call) to give them a chance to correct the issue.

2. Send a formal reminder

If the polite route doesn’t work, send a more formal notice referencing your contract’s payment terms and the overdue invoice.

3. Charge interest

Don’t be afraid to charge interest if it’s clearly outlined in your agreement. The Late Payment Act allows you to add 8% above the base rate—plus, you can claim debt recovery costs if necessary.

4. Offer a payment plan (if needed)

If your client’s struggling with cash flow, offering a payment plan can be an option. It’s not ideal, but it’s better than getting nothing. Just make sure the terms are documented in writing.

5. Get serious with a Letter Before Action (LBA)

If the payment still hasn’t arrived, a Letter Before Action should be the next step. It’s a final warning before you take legal action. Clients often respond quickly once they realise you mean business.

6. Take legal action

No payment? Time to involve the Small Claims Court if the amount is under £10,000. You can do this online. For larger sums, legal advice may be necessary.

FAQs for late or non-payment issues

Can I charge interest on late payments in the UK?

Yes, under the Late Payment of Commercial Debts (Interest) Act 1998, you can charge 8% above the Bank of England base rate on unpaid invoices.

What should I include in my contract to avoid payment issues?

Make sure to include clear payment terms (due date, penalties for late payment), your fees, and a clause that allows you to charge interest if payments are delayed.

Is it worth taking legal action for unpaid invoices?

If the amount is substantial or you’ve tried all other options, yes. For amounts up to £10,000, the Small Claims Court is a relatively easy and affordable option.

How can I vet potential clients?

Before starting work, ask around in freelancer communities or use services like Creditsafe to assess your client’s payment history and financial health.

Are there tools to help me manage payments?

Yes! Use invoicing software like Xero, QuickBooks, or FreeAgent to automate invoicing and send regular reminders to clients, keeping everything organised.

Chasing payments is no one’s idea of fun, but with the right strategies and support, you can minimise stress and make sure you’re paid for the work you’ve done. Plus, remember—there are UK resources available to help you when clients decide to play hardball!