New research has revealed that around half of all freelancers have considered giving up their freelance careers due to the stress of continued late payments.
Cash Flow the Biggest Worry for Most Freelancers
The survey of 1,002 freelancers and sole-traders by fintech company Ormsby Street revealed that late payments have forced around half of freelancers to consider abandoning freelance working – not surprising when 1 in 10 respondents admitted they have faced difficulties paying their mortgage or rent because of late payments.
The research revealed that UK freelancers are owed an average of £5431.03 in late payments. 79% said cash flow was their major business or career concern and 46% said they worry about having enough money to live on. More than half of respondents felt the late payment problem is getting worse, not better.
“Every freelancer knows that late invoice payment is one of the biggest frustrations, impacting cash-flow and causing much stress, from paying the mortgage to having enough money to live on,” said Martin Campbell, Managing Director of Ormsby Street. “For a freelancer to be owed more than £5,000 is clearly unacceptable and threatens the emerging freelance economy in the UK, which brings flexibility and work / life balance to so many.”
Freelancers Turn to Payday Loans
The survey found that on average, freelance invoices are paid 18.5 days after their payment due date – and only 19% of freelancers said that most invoices are paid on time. So how do freelancers cope with cash flow problems caused by late payments?
Some chase down the debt. 40% of respondents had taken out a County Court Judgement (CCJ) in the last year to do this, although 66% of respondents said they feel uncomfortable chasing late payments – and 57% worry that if they do so, they will lose clients.
Other freelancers are forced to finance the shortfall, with 37% admitting they turn to their family for a loan and 36% saying they use payday loans companies.
“Why should a freelancer waste their own billable hours chasing payment for work that has been successfully completed and is already due for payment?” asks Martin Campbell. “If customers are not willing to pay within the agreed terms then it’s time for freelancers to become more informed over whom they work with, and either ask for payment upfront or even choose to not work with company.”
Credit Checks: Time-Consuming But Necessary?
Before working for a new client, freelancers might want to consider checking the client’s credit-worthiness, particularly for larger jobs. 49% of freelancers said they have had to turn down work from clients because of concerns over their ability (or inclination!) to pay.
With this in mind, Ormsby Street is launching a freelance version of CreditHQ, their online tool for checking the credit status, payment performance and financial health of potential clients and customers.
“Freelancing has grown in popularity because of the choice and flexibility it gives people over their career, but its success relies on the prompt payment of invoices, which is not happening enough,” says Campbell. “Credit-checking potential customers and partners is straightforward to do and should be done by a freelancer every time they work with someone, to protect themselves against late payment.”