Selling unpaid invoices if you are self-employed (UK)
Thread poster: Giulia Piantoni

Giulia Piantoni
United Kingdom
Italian to English
+ ...
Mar 1, 2017

Hi All!

I was wondering if you know of any company that buys unpaid invoices from self-emplyed?
I found a lot that would do it for LTDs but nothing for self-emplyed, so I wonder if any of you have ever done it.

I am aware that I will incurr in a fee but this time I rather have my money ASAP than wait around for when they decide to pay.

Thanks a lot!

Giulia


 

Chris S  Identity Verified
United Kingdom
Swedish to English
+ ...
:-O Mar 1, 2017

There will be loads - look on Google.

But the fees are astronomical. And think of the admin too.

Surely it would be cheaper and easier to get an overdraft?


 

Giulia Piantoni
United Kingdom
Italian to English
+ ...
TOPIC STARTER
Overdraft is not the solution :( Mar 1, 2017

Hi Chris,

Thank you for your reply. I have already tried to Google it and all I can find is companies willing to buy unpaid invoiced from LTDs and not from self-employed, this is why I posted on the forum. I hoped someone could help me out.

I would rather not apply for an overdraft as the invoices will still need dealing with; it is 11 in the morning now, and I phoned the customer twice already with no luck. This is why I wanted to sell them, to avoid all the hassle which it is costing me a lot of time.
I'd rather pay the fees and have this over with!icon_eek.gif

G.

[Edited at 2017-03-02 10:59 GMT]


 

Tom in London
United Kingdom
Local time: 12:13
Member (2008)
Italian to English
? Mar 1, 2017

Chris S wrote:

There will be loads - look on Google.

But the fees are astronomical. And think of the admin too.

Surely it would be cheaper and easier to get an overdraft?


I've never heard of this. Is it legal?


 

Erik Freitag  Identity Verified
Germany
Local time: 13:13
Member (2006)
Dutch to German
+ ...
Factoring Mar 1, 2017

Tom in London wrote:

I've never heard of this. Is it legal?


Haven't heard of it? Surely it doesn't exist, then. Or does it?

https://en.wikipedia.org/wiki/Factoring_(finance)


 

Tom in London
United Kingdom
Local time: 12:13
Member (2008)
Italian to English
My question was....... Mar 1, 2017

...is it legal?

Specifically: if I have issued an invoice and then I sell it on, how do I keep a record of that in my accounts?


 

Chris S  Identity Verified
United Kingdom
Swedish to English
+ ...
Yes Mar 1, 2017

Tom in London wrote:

...is it legal?

Specifically: if I have issued an invoice and then I sell it on, how do I keep a record of that in my accounts?


Yes, it's very well established. Loads of companies sell their debts. Boosts cash flow and saves the effort of collection.

As a limited company, we get contacted by factors all the time.

The accounting treatment of it can be complex.

http://www.accountingtools.com/questions-and-answers/how-do-i-account-for-a-factoring-arrangement.html


 

John Fossey  Identity Verified
Canada
Local time: 07:13
Member (2008)
French to English
Factoring Mar 1, 2017

Tom in London wrote:

...is it legal?

Specifically: if I have issued an invoice and then I sell it on, how do I keep a record of that in my accounts?


Usually you are paid by the factor as soon as you sell the invoice, called assignment. It's then up to the factor to collect it from the debtor. It would be off your books as soon as the factor pays you.

Of course you only get a discount from face value - for small amounts typically 50% and only from clients with a good credit record. So it's a means of speeding up cash flow, not for collecting bad accounts, because the factor won't buy an invoice for a client with a poor credit history.

It's typically used by fast-growing start-ups who are constantly in a cash squeeze due to their growth, not typically by professionals with a steady income.


 

Kevin Fulton  Identity Verified
United States
Local time: 07:13
German to English
Not for microbusinesses like low-volume sole proprietors Mar 1, 2017

In my region of the US, factors often prey on physicians who rely heavily on payments from Medicare or insurance companies which pay 90 days+ after invoice submission, usually involving many thousands of dollars per month. The payers are creditworthy, so the risk to the factor is minimal. As someone mentioned, the invoices are sold at a discount which can be deep. A single-shingle translator is unlikely to generate the volume of business to make it attractive to a factor, and the customers of translators, frequently agencies, do not necessarily have the creditworthiness that would attract a factor, even if the translator managed to generate $10,000 in business a month.

 

Sheila Wilson  Identity Verified
Spain
Local time: 12:13
Member (2007)
English
+ ...
Debt recovery company? Mar 1, 2017

John Fossey wrote:
it's a means of speeding up cash flow, not for collecting bad accounts, because the factor won't buy an invoice for a client with a poor credit history.

This makes it sound as though factoring probably isn't the way to go with this one, not that I know much about factoring.

I would have thought that a debt recovery company would be the obvious choice here, assuming that it's a one-off need. The small claims courts would probably get you 100% but there would be some hassle and no doubt a long wait. Debt recovery companies often charge a percentage of what they are able to collect, typically around 30% of the invoice total. If they fail to collect you pay zero; but then you receive 0% of the invoice as well. They normally act fast.


 

Fabrice M'Vondo
Local time: 13:13
English to French
+ ...
Novicap Oct 9, 2017

Giulia Piantoni wrote:

Hi All!

I was wondering if you know of any company that buys unpaid invoices from self-emplyed?
I found a lot that would do it for LTDs but nothing for self-emplyed, so I wonder if any of you have ever done it.

I am aware that I will incurr in a fee but this time I rather have my money ASAP than wait around for when they decide to pay.

Thanks a lot!

Giulia


Hi Giulia,

Not sure if you already found what you were looking for but here is one for the UK: https://novicap.com/en/home.html

I am still surprised to see how many self-employed don't know what invoice factoring is about...

Good luck!

Fabrice


 

Sheila Wilson  Identity Verified
Spain
Local time: 12:13
Member (2007)
English
+ ...
How many freelancers earn £100,000 minimum? Oct 9, 2017

Fabrice M'Vondo wrote:
Not sure if you already found what you were looking for but here is one for the UK: https://novicap.com/en/home.html


FAQ from that site:
Which businesses can use Novicap?
You can use NoviCap if your company is B2B (business-to-business) and has an annual turnover of at least £100,000. Additionally, your clients need to have an annual turnover of at least £10 million. NoviCap accepts clients from any country and even public administrations.

I'd quite like to earn that much, but I'd also like to have some leisure time to enjoy the fruits of my riches.

[Edited at 2017-10-09 11:15 GMT]


 

Nikki Scott-Despaigne  Identity Verified
Local time: 13:13
French to English
Factoring Oct 9, 2017

Factoring has been around for years, but it is something large companies might use as a means of cutting their losses. For a self-employed person with only one invoice to transfer, I think you can suppose that it is simply not worth it. Unless the invoice is in tens of thousands, or unless you have a large number of invoices, then your proposition is not going to be of much interest to those who do this for a living. You are basically asking someone to take over a bad debt. The combination of risk and comparatively low amount is not an attractive prospect. For your to debts to be attractive to them, you need to have a number of them to make it worth their while so they can buy a bunch of debts cheaply from you and hope to make money on what they eventually recover. A one-off will be insufficient.

Your best bet is a debt recovery specialist or taking legal action through the courts.

Chasing the client through the court may be a good solution, and although I've been out of the UK for more than 20 years now, there are certainly still procedures for small claims which can be handled very simply. I think it can even be done online. However, the big problem there remains: even if you do get a judgment debt against your client, (i.e. the court rules in your favour), you may then have to take further action for enforcement (i.e. another claim to have the ruling applied). Getting a judgment debt entered is the easy bit. What it can do is prevent them from obtaining credit, eetc. but w/o further action, unless having a jdgt debt entered against them scares them, they could still get away with it and your invoice would still not be paid.

If you are prepared to pay a fee already, then it is best to pay a debt colelction agency to do it for you. You can probably deduct the cost of chasing up the debt. The usual steps will need to have been taken beforehand:
- documentary evidence of the work having been ordered, done and invoiced
- evidence that not paid
- evidence of requests for payment (with indications of fee, interest rate accruing, etc.)
- final notice (recorded delivery) that if not paid by X date, then action will be taken.

These steps are necessary whether you go through the courts or a debt recovery agent. Finally, if the client goes belly up, then having a judgment debt entered against them does give you a small chance of recovering some of your money. (I once got GBP200 from an old unpaid invoice of a lot more than that... several years after). If a client is going into receivership/liquidation, once salaries, the tax man, eetc. have been paid, there is seldom anything left for suppliers. That is why it is important to act really quickly.

It can sometimes be useful to ask them to pay in two or three instalments. That way you get some of the money into your bank account.

[Edited at 2017-10-09 12:03 GMT]


 

Nikki Scott-Despaigne  Identity Verified
Local time: 13:13
French to English
#myfirstmillion Oct 9, 2017

Fabrice M'Vondo wrote:

I am still surprised to see how many self-employed don't know what invoice factoring is about...

Good luck!

Fabrice


I learnt about this during my law degree and at law school afterwards. Translators probably don't know about it as the amount we earn does not usually make it accessible.


 


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