Top 10 excuses for not paying invoices

Last month, ContractorUK reported that client companies are resorting to 'every trick in the book' to delay the payment of invoices.

Here, Sid Home, managing director of Safe Collections, a debt recovery agency, considers the 10 excuses that contractors are most likely to hear from clients when chasing unpaid invoices.

•'I can't afford to pay you until my customers pay me'

This is a difficult response to receive, having yourself asked why your invoice has not been paid. If it is to be believed, ask whether the customer can make an immediate partial payment of the total sum. As a freelance contractor, you need to establish precise timelines as to when your client will be able to pay. To this end, should you request post-dated cheques?

•'The cheque's in the post'

This is probably the oldest line in the credit control book! As the 'payee', the first request you make is for the cheque number. Then ask; when it was paid; what was the precise value and whether it was sent 1st or 2nd class post? It is important to note very carefully what your customer says in the event you need to ask them to cancel and reissue a cheque. You can also gauge your client's integrity by looking at the cheque number of any subsequent 'replacement' cheque, and comparing it with the one they claim was sent originally.

•'I'm not paying, there's a dispute!'

Is there really a dispute? If there is, then the client may well have good reasons not to pay. The freelancer given this excuse needs to establish, as a matter of urgency, precisely what the query/issue is, and what needs to be done to facilitate the client making the payment. Whatever the outcome, it's always good practice to confirm the remedy in writing for clarification purposes (and to further demonstrate that you have rectified the problem). This is one of the reasons why we recommend you call your customer 7 days after dispatch of your invoice. This can often resolve any queries before your invoice even becomes due for payment.

•'I have not received the invoice'

This is another old but overly used line to explain why the client hasn't paid. As stated, it's is always good practice to telephone the client 7 days after dispatch of your invoice to confirm the they have actually received it and any supporting documentation. On the phone, your official line can be that you're calling to check that all was well with the goods/service provided. Do remember though to make a note of who you talked to, and the time and date of the conversation.

•'I returned the invoice'

Typically, the client follows this excuse, breathlessly, with 'because 'the order number was wrong/ not on the invoice,' or 'because the invoice was addressed to the wrong company name,' or 'because the amount was incorrect.'

As a contractor, it is imperative to ensure that your invoicing documentation is correct first time, otherwise you are giving your customer a legitimate reason to delay payment to you. If you receive purchase orders then read them and ensure you comply with their conditions of order (unless you have a written signed agreement that allows your Terms & Conditions to override them). Always ensure the order number(s) and end-client's name are accurately quoted and the invoice is addressed to the correct company name, spelt out in full. If in any doubt, telephone the person who has given you the order to confirm the necessary details (preferably in writing).

Also, ensure that the invoice is checked before you send it to the client. Ensure it's correctly priced, and if there is a variance in the price agreed, check that your client is happy for the reasons for the difference (- again preferably confirm this in writing, after you send the invoice).

•'The authorised signatory for the cheque is not in the office'

Either the person to administer your cheque is not in the office, or they are on holiday, off sick, or in meetings all day! Does their business now grind to a complete halt because of this individual's absence? If you're 'sold' this line, find out if there have been any pre-signed cheques that can be used to make payment to you, or if there is someone authorised to organise an electronic payment to you, assuming you can receive such a transaction. Alternatively, establish precise timeframes as to when the person will be back and ensure you contact them then.

•'The director/owner has died'

It's rare that this reason for not paying an invoice is given, but it has been cited. Of course, business life still goes on.

That said, if the firm to suffer such a loss is a sole proprietorship then effectively the business has ceased trading. However often it may continue operating with a surviving relative "taking over the reins". According to law, you, as a supplier, have a claim on the estate of the deceased. A tactful telephone call expressing sympathy, and querying how the business is to be continued (and by whom) may prove fruitful. In the case of a partnership suffering a death, then the partners have 'joint and several liability' to the debt and should pay, though a respectful wait on your part may well be appropriate. If it is a limited liability company (an 'Ltd,' 'PLC,' or 'LLP'), then the business should continue to trade.

•'We have ceased trading/are in liquidation/receivership '

Too often this claim is tantamount to a 'scam' to avoid payment. As a freelancer, the onus is on you to quickly establish precisely how the company has ceased trading. Is the company/ business in 'formal insolvency'? (For example, Liquidation, Receivership, Bankruptcy, IVA) If it is, you need to find out the name of the firm of insolvency practitioners who are dealing with the administration of the case. Contact them without delay and lodge a claim as soon as practicable. If you hold reservation of title or hold any intellectual rights or have any security you need to make the insolvency practitioner aware of this, again as matter of urgency.

You will also need to provide evidence that the company in liquidation, receivership or administration, has signed and accepted your terms and conditions of business. Without this, you stand little or no chance or retrieving and goods or property from the insolvency firm dealing with their affairs. If the business has merely ceased trading, you must satisfy yourself that the business has no assets in order to make a commercial decision whether or not it would be appropriate to pursue the debt through legal channels.

• 'You will have to wait until we have paid higher priority suppliers / creditors'

This should NEVER BE ACCEPTABLE to you as a freelance contractor to explain why an invoice has not been paid. When told this by a client, it's crucial to remember a credit manager's oldest adage - 'He Who Shouts Loudest Gets Paid First.' To this end, speak with your client and explain your terms of payment and request immediate payment and pursue the monies vigorously. This reinforces our advice about ensuring from the outset that your client is aware, unequivocally, of your payments terms and that you expect to be paid on your stated due date.

•'I'm in the process of changing banks'

Not an uncommon claim in the current climate, but does their businesses again grind to a complete halt? This is doubtful and normally there are some provisions made to access funds. The contractor waiting for their invoice to be paid by such a business needs to establish exactly when this problem will be resolved. Can the client pay by credit card, or can they make a Paypal transaction? Either way, ensure you get a specific timeframe for the account switchover or for resolution of the problem, with the result being a precise date that you can expect to be paid by, after which time communicate that you will apply interest under the Late Payment Legislation.


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