Of course it does. I would never do that, and I think, hope, that very few others would either. Not only would I have railway staff chasing me along the platform demanding immediate compensation, I might even find myself confronted by the police. Most people now book tickets online on their phone and pay before stepping onto the train, but even if that were not the case, I would feel uncomfortable with the idea of delaying any payment. I even feel uncomfortable when the garage mechanic repairs a faulty exhaust but I can’t pay straight away because their invoice isn’t ready.
Yet this is precisely what I and countless other sole traders or small businesses are faced with month after month. For example, if I start working on a translation project on, say, 1 December 2019, irrespective of how long it takes to complete, I will invoice this work right at the end of the month, which is the usual practice in the language services industry. Each company has its own invoicing policy, which essentially means that each invoice I send must be adapted to the specific requirements of the accounts departments of individual companies: for example, all require different information relating to the bank into which the payment is to be made; some expect invoices to be uploaded onto a dedicated portal; some require “proof” (can you believe it?) of completion of the work in the form of a copy of the PO or visual evidence verifying fulfilment of expectations (for which they have already confirmed receipt); some have particular preferences regarding colour and font. It seems preposterous that someone who has already received goods and services is dictating the terms under which they are prepared to pay. To continue, once compiled according to these specific demands, this hypothetical invoice will be sent between 28 and 31 December 2019, with a “payment due” date, based on the 60-day payment terms imposed by what appears to be an increasing number of companies, of 28 February 2020. So, as unreasonable as it sounds in view of the fact that the work was done and duly delivered in the first few days of the month, can I then expect the payment to reach my bank account by 28 February 2020?
Some accounts departments will then insist on a further few days of waiting while the “payment is processed”. I will be lucky to receive the outstanding payment before 10 March. I wish this were an exaggeration, but sadly this is not the case. As if 60-day payment terms were not bad enough, the reality is much starker. The period of time between work I do tomorrow and the payment landing in my bank account can actually become more like 98 days. This is more than one quarter of a year. How is this even remotely acceptable?
As one contributor to the Ghostblogwriters.com site comments:
“Sometimes, 60+ days is totally fine. But as you’ve probably seen, it’s not the 60-day terms that is frustrating. It’s when 60 days turns into 70, 80 and even 100+ days.” This site also offers some useful tips, for example on sending reminders, and including the contact person in the accounts department in all communications.
Five years ago, when I first started working as a free-lance translator at the very base of what proved to be a precipitous learning curve, I sought advice on the subject of invoicing from a small business owner. Not all he said was relevant to me. For one thing, he was working in the construction industry and, for the most part, operating within a twenty-mile radius. Much of my work comes from the continent. However, one thing he said stuck in my mind: “the little guy does what the big guy says”. Naive as I was then, I accepted this as normal. And to my mind, herein lies the problem: an unacceptable situation becomes so commonplace that it becomes routine. Or worse, we are persuaded that because it is standard practice and legal, we sleepwalk into what is clearly morally outrageous in the mistaken belief that it is somehow tolerable.
I have even tried to rationalise this situation by reminding myself that there is a chain of beneficiaries and an end client, and that companies must await payment themselves before paying service providers. Seriously? Who am I trying to kid? That is like me refusing to pay for computer repairs (my service provider) until I am paid by those who owe me money for that month (my end client). And this doesn’t even take into consideration the fact that companies with 60-day payment terms tend to be the larger fish in the pond and are more than capable of settling up earlier. Another rationale I often hear concerns the length of time it takes to process payments: documents need to be signed off, paperwork waiting in the in-tray of the person responsible etc. Again, this is a weak argument. I recently grew tired of one particular company who were repeatedly late with payments, and finally announced that I was no longer able to collaborate. Surprisingly, the outstanding amounts appeared in my account with no further hesitation. Interesting. Let’s be honest, if companies can’t pay up within 30 days, they shouldn’t be seeking services in the first place. After all, you don’t buy what you can’t afford.
There is also a palpable inequality here. I have always been meticulous in observing deadlines, knowing that a late delivery could have consequences for a number of people, and have never been late in delivering a completed, thoroughly checked piece of work. If I had, I would have been under relentless pressure to get the work done, and potentially faced with the possibility of reduced payment or refusal to pay. The double-standard here does not need pointing out.
I’m not alone. In an article entitled “Late Payment” on the FSB Experts in Business site, I read that “Small businesses are owed on average £6,142 mostly by larger firms not paying them for goods and services on time” and also that “37% (of) small businesses have run into cash flow difficulties, with 30%... forced to use an overdraft”. The writer then expands on some details associated with being the victim of late payments: being bullied into reducing an already agreed price, for example. This latter problem is particularly sinister since, if some clients are offering earlier settlement if the provider is prepared to accept less, there is the possibility of exploitation and manipulation of those in serious need of funds.
I use the word “snare” in my title, because the 60-day payment terms (and some companies insist on 90 days) can function as a way of trapping providers. Once someone owes you money, staying on the right side of them by continuing the collaboration can seem inevitable, a little like a donkey and carrot scenario. This, again, has become so much the norm that it is (wrongly) considered acceptable.
As far back as Nov 2018, Rachell Astall made the alarming observation on the gocardless.com site that 41% of small business owners were finding “late payments more concerning than Brexit”, with 89% reporting becoming “stressed and anxious” due to “uncertainty around when payments will come in”. Consequences of this, she writes, include inability to grow the business, staffing problems and even sacrificing salary or holidays.
No matter how carefully someone in my position manages their monthly budget, there is a certain amount of unpredictability in the world of a freelancer. I never know how much work I will receive during any particular week, let alone month, and with different clients having different payment terms, budgeting monthly incomings and outgoings (bills) is challenging and highly variable.
There is, of course, the question of what is actually legal. According to EU law (we are still just about in the EU at the time of writing), this issue is regulated by the Late Payments Directive 2011/7/EU, which states that “the payment period for businesses must not exceed 60 days from the date of safe invoice receipt”. This law appears to allow for some flexibility if such flexibility is agreed between the client and contractor but is clearly open to abuse. Most freelance translators are not in a position to take legal action, partly because they are so frantically occupied in completing the next project. So larger companies can easily get away with loose interpretation of the legislation:
"It should therefore remain possible for the parties to expressly agree on payment periods longer than 60 calendar days, provided, however, that such extension is not grossly unfair to the creditor." (Article 13 of the Preamble of the Late Payments Directive)
Two further points should be made here: the first is that a small number of organisations will not accept invoices until the total amount owed exceeds a specific threshold, usually around 40 euros. This means that it can take several months to accumulate the desired amount, months that are usually being spent working on other projects. In my earlier analogy, this is like me getting off the train at Beaconsfield instead of proceeding to Marylebone, then claiming that until I have clocked up enough journeys to total an arbitrary amount it is not worth the time it would take to pull my wallet out of my pocket and pay. Secondly, since some firms do not accept invoices until they issue an invitation to invoice, which is often beyond the end of the month in question, the number of days is only counted from the date of receipt of the invoice, a date that is not under the supplier’s control.
Some companies will glibly inform you that 60-day payment terms are “normal” and “standard practice”. However, unless you have good reason for accommodating this: you are invested in that particular type of work, you trust and respect your contact person/project managers, you can budget effectively and accordingly, my suggestion would be to refuse. When approached by the company, set out some clear terms and conditions, stick to them firmly and don’t assume that you are always in a position of weakness. Yes, there are other service providers in competition with you, but there are also other agencies/clients who require your services. And if you agree to be thorough, reliable and deliver/complete on time, with good communication and willingness to go that extra mile, for example by helping out when PMs need something in a hurry or just need the odd question answering, they will recognise the value of working with you and it is then up to them to take or leave your terms. No one wants the apprehension that comes with constantly having to check a bank account to find out whether that missing payment has finally arrived. Our time is better spent on the work we enjoy and joined the industry to do.