Invoicing and credit control
There are minimum legal requirements to be fulfilled when issuing an invoice.
However, how you handle credit control is mainly left to you.
The European Union has a framework for VAT invoicing. Individual member states do have slightly variant rules, though. Therefore please refer to your country’s inland revenue website to find out which requirements you have to fulfil when invoicing. You’ll find the UK rules on which details to include in your invoices if you visit the HMRC’s gov.uk website and search for “invoicing”.
On these pages Iolante aims to give you some hints as to what is useful to have on an invoice in addition to the obligatory information.
Invoice reference number
When you start up your translation business, don’t give your first invoice the number 1. That looks as if you’ve just started your business (and thus lack experience). To instil some trust in your abilities, start with number 455 or so. As long as you use consecutive numbers from then on, there is no reason why you can’t start with any number you choose. The rule is that the invoice number must be unique and sequential.
We also recommend to give invoices meaningful identifiers. Stick to your consecutive numbering but add some identifying letters like, 123ASD. “ASD” standing for “Associated Sugar Distributors”. This way, when at some point you need to find the invoice for this company, you just look through your system and hunt for the initials. Much quicker than having to remember the number or checking all your invoices for the required period to find the one you want.
Design an invoice that is suited to your needs. Have a heading which clearly states all your business details at the top. Make sure the space you leave in your template for the client’s address details is a) big enough to hold long addresses, b) is situated on your page in such a way that it is easily visible in letter windows. Having to print labels or rewrite the address again on windowless envelopes is labour-intensive. Avoid.
Details to include
When detailing the services you have rendered, be specific, not vague: French-English translation of 350 word certificate of no impediment for John Smith. Minimum fee applies. This may help you later when you try to remember what you charged for a certain job or to a certain client or why you charged them a specific fee.
State clearly all disbursements, include receipts with your invoice. (Having made copies for your own records.)
If you are exempt from charging VAT (for example if you live in the UK and your turnover is below a certain limit), state: “This business is exempt from charging VAT as it does not exceed the HM Revenue & Customs registration threshold, currently at £x.” It will save you from having to explain it to puzzled clients who may not be familiar with the system.
Include payment terms. When do you want the money by and how should the client send it? Who are cheques to be made payable to or, quicker and more convenient, account details for electronic transfers. Consider your preferred payment terms. Agencies have their own terms they will automatically apply to all translators. However, you are more in control of payment terms for private clients. You can insist on advance payments for translations, maybe providing alternate pages of the translation in pdf format as evidence that you have done the work, and only sending the client the translation after you have received payment. In the case of certified translations, you can send a draft together with your invoice and only certify the translation after receipt of payment. You can negotiate payment terms with commercial companies: “I usually prefer payment within 14 days, but am happy to negotiate terms that suit you better” generally results in payment terms the client adhers to.
Keeping track of outstanding invoices
When you write up your invoices, enter them into a spreadsheet. Enter the most important details:
- Date of invoice
- Date paid
- Invoice number/identifier
- Customer name
- Job details
- Total price
- Amount received
Keeping a record of the date your invoice is paid will enable you to quickly get an idea how well your clients are paying and which (type of) clients are not. Always check the amount people send you against the invoice you wrote. The amounts sometimes don’t tally. Some customers overpay, some underpay. Checking now will save you a lot of work later. Having a spreadsheet like this is also very useful as it gives you the income side of your accounts. Half the bookkeeping job done!
Use a credit control system
Have a checking system in place! To be in control of the credit you give, you need to strictly observe your own rules. Never bend your own rules!
Here is a very simple credit control system: have two trays, one with outstanding invoices, a second one for overdue invoices. Add new invoices to the bottom of the pile, that way the oldest invoices will always be at the top. Check every day which invoices have been paid (file away), which have not and which have become overdue. The moment they are overdue, contact the client.
You could also check in your income spreadsheet but having physical pieces of paper to look at is the right way for some people.
How to deal with late payers
Make sure your client has received the invoice. If they say they haven’t, immediately send them a copy (ask whom to send it to), adding one week only to the original term and stating “This invoice is now overdue.” When the seven days are up, contact them again (best to speak to someone on the phone), ask what the problem is. Point out that you are a sole trader and that you rely on your income to live. In the UK, you are covered by the UK Late Payment Law, in the EU by the Late Payment Directive 2011/7/EU. Amongst other things, the legislation allows traders to charge a considerable amount of compensation plus interest for overdue accounts. Most companies will pay up as soon as you threaten to apply these charges.
If the client still doesn’t pay, keep reminding them. The few customers who have no intention of paying rely on wearing you out. Don’t let them!
It may become necessary to consider legal action to obtain your money. In most cases, the threat of legal action carefully outlined in an email is sufficient! In the UK, your first port of call is a court claim in what used to be called the small claim’s court. Information on the process can be found here.
Another option is to threaten the client with a statutory demand, whereby the debtor has 21 days to either pay the debt or reach and agreement to pay. Should this fail, you can apply for the debtor to be declared insolvent. This is the nuclear option, I have never needed to action! The well-worded and evidence threat of a statutory demand is generally sufficient.