Freelancers contributed £271 billion to the UK economy in 2017 so they play a vital role. Over the last 12 months almost three million people (around 10% of all people in work) have been engaged as a freelancer or under self-employed status.
Freelancing has many benefits. You get to work for yourself, choose the projects which excite you, and in many cases earn more than an employee on PAYE.
Having said this, one major challenge freelancers face is a constant battle to get paid. Recent research shows that only 19% of freelancers are paid on time, with related invoices being paid on average 18 days after their due date. This means time is taken up chasing payments – time which could be better used generating more work.
Freelancing does create additional administration for the individual e.g. raise invoices and managing their own cash flow. This in itself can be quite stressful, creating uncertainty about payments plus anxiety for some about having to manage and maintain their own admin and cash flow. This is an increasing problem, with recent data showing that 52% of SME owners blame poor cash flow for negatively impacting their mental health.
However, these issues can be solved by recent advances in cloud technology, which allow freelancers to automate their invoicing, conduct frequent credit checks on clients, and set up reminders for overdue invoices, and help manage issues such as cashflow.
Insights from checking customer credit status
Checking and monitoring the credit scores of customers can be an effective way for freelancers to have up to date information on their clients’ ability to pay their bills. A credit score is a numerical indicator of a consumer or business’s ability to service debt based on a number of different factors. These include records of servicing credit, County Court Judgements (CCJs) and a history of applications for credit.
This has created an opportunity for freelancers and SMEs to become savvier about how credit scores work, and has resulted in established credit scoring companies offering the service to a wider customer base. These companies allow freelancers and SMEs to check on the financial health of their customers, and subsequently provide them with the insights and indications into how long both new and existing clients will take to pay them. This technology also helps them to identify any adverse changes to their credit activity.
Automated invoicing reducing admin hassle
Processing invoices is cited by freelancers as being one of their top five administrative burdens. 29% of those surveyed by The Association of Independent Professionals and the Self-Employed (IPSE) listed is as being a task which could otherwise be spent on winning or completing new work.
Whilst many freelancers still generate invoices with their own basic Excel or Word templates, there are now a plethora of cloud invoicing tools on the market which can save time around both processing invoices, as well as chasing for associated payments.
Cloud invoicing, either used as a feature within cloud accounting software or as a stand-alone tool, allows freelancers to create invoices on the fly from smart devices, include direct payment options, monitor open rates and set up automatic chasers.
Additionally, the fully customisable features of cloud invoicing allow creative freelancers to imprint their own unique identity on their paperwork.
These services can help freelancers reduce the time they spend on chasing late invoices and also help them better manage their cash flow due to collecting payment faster.
Additional productivity gains
Whilst there are a number of options on the market for cloud invoicing and credit score data, utilising one solution to take care of both of these needs can create further productivity benefits through saved time. Using an all-encompassing product aggregates insights from both invoice and credit score data, which provides enhanced insights into the likelihood of customer behaviour and their ability to make payments. This information can then be used to collect payments faster through a combination of both human intervention, as well as automated reminder.
Late payment is a significant issue for freelancers. Most will spend 20 days or so every year chasing invoices. The stress of this can be associated with damage to their mental health. Because of this anything that can be done to reduce the time spent, and speed up how quickly payments are received must be a positive move.
ABOUT THE AUTHOR
Inna Kaushan is co-founder of Solna, a smart invoicing platform powered by credit score data. Solna speeds up the invoicing and payment process for freelancers and small businesses. Through leveraged credit data that is overlaid on the platform’s invoicing and reporting functionality, users get a clear picture of their customer’s financial health and their overall exposure to risk. The system’s automated credit control functionality automatically chases overdue invoices – freeing up time and ensuring faster payment.