I am in a whole world of thoughts

[SLEE]

Right now I am unsure about what my next step should be.  I have been freelancing now for 18 months or so and I have a few opportunities that i could go for.
I have a massive roller coaster ride with being freelance and one big thing that has caused me problems is large companies paying late. With this I am toying with the idea of this is for me or now and if I should go get a job. My first thought when I think about that is rght now I love the freedom I have and when everyone is paying me I am happy.

The other option is to set up with a friend, they are a designer and right now im not sure if they would bring in enough work to be 50/50 so how could i move that forward?
Another option is to look at taking someone on part time but does that mean I would have to be Limited?
Should i think about taking someone on, on a contract basis rather than employing them?

HELP!

[Whatever]

Lee,

I would say if you're being paid late, should you be looking at new staff? They wouldn't solve the problem. Maybe factoring could help?

Taking a member of staff on doesn't mean you have to be Ltd, that's a whole different thing. Ltd guarantee is whether you personally can be held liable for company debts and other issues.

[sarahA]

Paul's right. Your option of taking someone on or setting up with a friend won't solve those late payers, they're two separate issues.

If you want to set up with a friend then you need to either look at simply working side by side, where you invoice them for work you do for their clients and they invoice you for work they do for your clients. This is how David and I did it until we went Ltd together. Or you could go into partnership, LLP or Limited, but if you're only just starting with this friend then I wouldn't recommend doing too much / setting too much up together until you know it'll work.

Taking someone on means registering as an employer for PAYE with HMRC at least (not sure if you need to register elsewhere? I left that to our accountant!). You'd then need to deal with wages, deducting tax, statutory sick pay, holiday pay etc. If the person can ensure they've got other streams of income too (which I would assume if you're looking at them only being part time for you) then I would just get them to invoice you as a freelancer/contractor rather than you paying them as a staff member, but ensure they do have other areas of income, else you can still get hit as an employer (loophole that was closed up a number of years ago I believe).

In regards to clients paying late, is this for the final part of the work you've done for them, eg. are you taking a deposit, a payment part way through (depending on the size of the project). Do you have it written into your ts and cs that if final payment isn't received then the work comes offline until it's paid for? Or is this just for ongoing maintenance type work?

If you're doing ongoing work and constantly having to chase specific clients for payment, then get them to pay an estimated figure up front. If it's for major work, remove the work whilst it's unpaid for. They've not paid for it, why should they have it? You give them an appropriate amount of time to pay and if it's not paid by the due date give them a final warning before removing the work.

Another method is to offer an incentive, a bit like utility companies do. eg. pay this bill within a week and get 5% off your next bill, or if you give them discounts on their hourly rate or hosting, just say if they don't pay on time then the discount will be revoked.

It's harsh and that's why I leave it to David to deal with as I'm a wuss

[robwhizz]

I'm not too sure about factoring. We've recently dealt with a subcontractor who was factoring with Lloyds TSB. Wasn't a great setup. They weren't getting anywhere near the amount of money upfront they'd hoped, plus Lloyds were taking a decent chunk out of it in commission. I wouldn't want to be giving another company money to collect money for me. Factoring is usually all-or-nothing. They want every invoice regardless of how good the payers are. If you've customers who pay well your factor will be taking your cash for nothing.
We just use a debt collection agency and therefore only pay on the hard to recover debts.
The other drawback to factoring is that customers may immediately jump to the conclusion that you have money problems. Perhaps not such an issue for a freelancer, but we've dropped contractors/suppliers who've used factors because we couldn't take the risk that they wouldn't come up with the goods. Might sound harsh, but we try to offer our customers good service and problems down the food chain reflect on us.

What are your contracts like? Do you take deposits? Good contracts with deposits or staged payments and solid deadlines/credit terms will help get the money in and help the debt collection agency if you need to go that route.
It is very difficult to manage cashflow, esp. when you are on your own. You need to build up savings to aid it (easier said than done), or maybe have a good look at an overdraft facility.
I had a meeting yesterday with a customer to clear some invoices dated back to 2007! In our experience very few of our customers pay within the 30 day terms. Most are around 60-90 days with some larger customers rarely clearly all outstanding invoices and the debts drag on for months and years. With regular work it's not a big problem as there is always something coming in even if it's quite late, but you need to factor in times when work is low and payments don't come in, yet bills do!

You can also charge interest on overdue accounts. It's not something I do, so I don't know the ins and outs, but it could would be worth getting it into your T&Cs. When we've used debt collectors in the past, they've added the interest and got it all paid.

[SLEE]

Thanks for the advice guys /gals

The person I am thinking of taking on is someone I have done lots of work with since being freelance my concern is that if I give them regular work that the good ol tax man will see that i should be employing them. They do have other work. My idea to take them on is actually to save money as i will be able to pay them less ie a wage rather than freelance fees due to the regular work.
I have also thought about contracting them out would that be better?

Hopefully I have rectified the late payments this afternoon i spoke to some higher people who were very apologetic so fingers crossed i wont experience it again with these particular companies.

i did look into the interest charges etc but i didn't want to tick them off as they do provide a substantial amount of work.

[sarahA]

You can have a regular freelancer and give them a fair bit of work providing they get work from elsewhere too. I don't know what percentage threshold the taxman looks at but I would imagine it would be fairly high. The loophole was closed for people who solely worked for one company but invoiced rather than on PAYE, so that the employee could claim expenses, and the employer could pay a slightly higher wage as they didn't need to pay employer's NICs and the tax.

I would imagine that if the taxman wasn't happy then your argument would be that you simply hired that person on the assumption they got work from elsewhere. You're not a company with several employees (freelance or otherwise), you're a sole trader, and you're simply hiring on a per contract basis.

As for paying them less in a wage, you would need to factor in employer's nics (about 10% of their wage I think), 4 weeks (if it's still that?) a year holiday pay or pro rata if they were part time, the fact you'd need to pay them their contracted hours, regardless of whether you had work for them or not etc. Plus you need to find the right amount to ensure you're not out of pocket but your employee is happy with the amount they're getting paid. At least with freelancers you simply pay what they ask, or negotiate on that, but you pay the necessary amount for their work and nothing more.

Glad you've possibly made headway with some late payers.

[net-curtains]

Hopefully I have rectified the late payments this afternoon i spoke to some higher people who were very apologetic so fingers crossed i wont experience it again with these particular companies.

You should still make sure you have a solid contract set up and signed, with options in place to deal with potential late/non payment. Also make sure that if a project is delayed by the client - for example you're waiting months for them to supply information or content - then you have an agreement whereby you can invoice them for the work done up to that point.

I've been taken by surprise by previously reliable, regular clients trying to get out of paying their bills.

[Shirker]

Can't recommend factoring highly enough as a way of smoothing late payers out. We've used Lloyds Commercial Finance for about a year and a half now and its been very good. Their charges are very low, (we pay about £250 a month on about £30k of invoices per month) and they give a good chunk of the invoices as available immediately. Also, its only a month's notice to get out of it again.

We had big problems with late payers a while back but the factoring with Lloyds has been good. Also, some big companies who previously insisted on paying on 90 day terms turned out to have a policy of paying factored accounts on 30 day terms.

[SLEE]

Good to know thanks. I am going to look at contracting i think and see where we go from there I know they have other work so that should work out ok.

As for the contract i do have in there about late payment etc but it is a balance to not annoy them as i need them for the work so it is quite difficult. I have spoken to some of them now and hopefully i won't have nay more problems in fact they will be paying me more 

[civ]

one big thing that has caused me problems is large companies paying late.

Don't release work until the account is settled.

If they are late, don't release the work until your late payment charges are paid.