The Fizz! Blog

My customer hasn’t paid their invoice - what can I do?

Understandably, many freelancers and other small business owners are reluctant to chase payment of invoices - they fear that it might cause problems in their relationship with the client.  In honesty, we think that fear is almost always misplaced - businesses that don’t pay invoices on time generally see that as part of the general cut-and-thrust of commercial life, and are likely to think that chasing them is a perfectly reasonable thing for you to be doing!

But if you’re still not comfortable doing it, there are a couple of other routes you could consider in order to depersonalise things.  You can fire reminders out of your accounts software (we’ll discuss statements of account shortly), rather than sending them personally (Xero even has the facility to send payment reminders automatically when an invoice becomes overdue - though if you do that, you need to make sure you keep everything up to date, lest Xero remind someone who has already paid!).  Or (/and) you could create a separate email address for your “accounts department” and have financial stuff go through another account entirely.

Broadly, businesses tend to pay invoices based on one of three triggers:

• The invoice (either paying it immediately or in some sort of scheduled pay run).  In an ideal world, you only have this type of customer!  Obviously the important thing with these customers is just to get an accurate invoice out on time to the right person.  If you’re dealing regularly with repeat customers, you might also consider getting something in place to just collect money from them automatically without their needing to lift a finger.  We use GoCardless for 95% of our invoices; it collects them automatically by direct debit on the due date and does the Xero reconciliation of the payments for us, saving time and effort all round.
• A statement of account.  This is a periodic (usually monthly) document summarising what a customer owes at a given point in time.  Big businesses are very used to issuing and receiving them.  They’re very easy to generate and send out via any mainstream accounting software.  If you have multiple customers owing you money at any point in time, you might want to just diarise sending out statements of account every month to anyone with an overdue invoice (we do), as this will quite often prompt payment of a forgotten invoice, or a request for a duplicate of one that’s gone astray.
• A legal threat!  It’s actually obviously highly unusual for that to be someone’s literal trigger, though we have been aware of a couple of local businesses over the years who routinely wouldn’t pay a bill until they got a threat of legal action.  Again, for them it just seemed to be part of the game of business.  Fortunately we were not amongst their suppliers!   We have seen clients have success getting payment of overdue invoices simply via a lawyer’s letter, either from a low-cost online provider like Thomas Higgins, or a firm they have a broader relationship with.  Of course, we’ve also seen clients who’ve had to go further down the legal process.

Something else to consider - if an invoice is paid late, you’re entitled to charge interest.  This is another thing that businesses are understandably reluctant to do - but which in reality we’ve never seen cause a problem.  Another part of the game for late payers.

The Small Business Commissioner has some more useful suggestions about how you might go about making sure invoices to your customer are received, processed and paid properly.  Try to get past any reluctance to assert yourself, especially once invoices are actually late - from that point, most customers will genuinely recognise you’re just doing your job!

www.fizzhq.com

Can my limited company pay for my counselling or therapy sessions?

As ever with these questions, the "can" is a red herring that tempts a literal but unhelpful answer.  Your company can pay for anything, the real question is whether there will be knock-on tax consequences that make it a bad idea.

In this case, perhaps surprisingly, there probably aren't any adverse consequences.  The rules, HMRC's guidance about them and HMRC's internal manuals are clear - an employer can pay for counselling for employees with no tax consequences for the employee, and though HMRC say the exemption is tightly drawn it actually covers a lot of areas.

Now, this exemption is plainly not intended for owner-managed businesses.  For a big employer, claiming that they're only providing the therapy because of their needs as an employer, and that long-term personal benefit to the employee may well be created as well but it's not the reason for their footing the bill, is a reasonable assertion.  If it's your own business, then that dividing line between employer and employee is not so clear.  But HMRC are pretty unambiguous about it, so if you’re comfortable that the counselling you’re contemplating falls within HMRC's guidance as tax-free, then you should feel confident going ahead.  Your company must provide the therapy, so should contract with the therapist itself - it's no good arranging it yourself and claiming the costs back if you want the setup to be robust.

If you're a sole trader or a partner in a partnership, then this doesn't apply; these are employment tax rules.  A sole trader or partner will probably find it difficult to impossible to sustain the argument that the cost is tax-deductible - it's have to be incurred wholly and exclusively for the purpose of their trade.

www.fizzhq.com

It's not your *January* tax return!

The last tax year finished a couple of months ago, which means that those of us who have to do a Self Assessment Tax Return can do it any time from now on.  The ultimate deadline is 31 January, but that doesn't mean you have to do it in January!  We've ploughed through a good number of client tax returns already.  There are loads of benefits to doing your tax return as early as you can:

• You don't have to have it in the back of your mind, hanging over you.
• You don't have to go around searching for year-end documents nine and a half months after you received them.
• You don't have to desperately try and remember what happened the best part of two years ago.
• If you've got, tax, NI or student loan repayments to make, you know how much they'll be well in advance.
• If you're due a refund you get it sooner.
• If you're applying for a mortgage, you can get evidence of income quickly if you need it.
• Your accountant will love you and shower you with praise!

So don't think of it as a January return that you might do early.  It's an April return that you're going to get on to RIGHT NOW!

www.fizzhq.com

The last tax year finished a couple of months ago, which means that those of us who have to do a Self Assessment Tax Return can do it any time from now on.  The ultimate deadline is 31 January, but that doesn't mean you have to do it in January!  We've ploughed through a good number of client tax returns already.  There are loads of benefits to doing your tax return as early as you can:

• You don't have to have it in the back of your mind, hanging over you.
• You don't have to go around searching for year-end documents nine and a half months after you received them.
• You don't have to desperately try and remember what happened the best part of two years ago.
• If you've got, tax, NI or student loan repayments to make, you know how much they'll be well in advance.
• If you're due a refund you get it sooner.
• If you're applying for a mortgage, you can get evidence of income quickly if you need it.
• Your accountant will love you and shower you with praise!

So don't think of it as a January return that you might do early.  It's an April return that you're going to get on to RIGHT NOW!

www.fizzhq.com

Look after yourself as you'd look after an employee

If you’re a business owner, imagine an employee comes to you asking for a change to their pay arrangements.

“I was wondering if you could pay me less than I’m due most months, but then occasionally pay me a much bigger lump, once I’m really struggling.  And could you also pay for some of my personal costs, then wait until I’ve forgotten about them before making me pay the money back?”

You’d probably refuse, telling your employee that’s a chaotic way to run their finances, and that you care too much about them to enable self-destructive behaviour like that.  Regular, predictable pay is definitely better for everyone in the long run.

“How about if I only make my expense claims every three years, so that you don’t really have a full idea of your overheads, and I never have a clear idea of how much money I have in the long run?”

You’d probably turn that request down too, and encourage them to do their expenses monthly, so that everyone knows where they stand (and so that it’s not a massive task down the line to figure out what they were doing years ago).

It’s exactly how lots of business owners treat themselves though.  Look after yourself in the same way you’d look after that employee.

www.fizzhq.com

Stuffocation: Living More With Less

Last year, we really liked the book Happy Money - it had some really good evidence-based ideas about how to change your spending to improve your wellbeing.  Along similar lines is James Wallman's Stuffocation: Living More With Less.

Wallman's main (again, largely evidence-based, though perhaps not as rigourously as Happy Money) conclusion is that being an "experientialist" is better than being a materialist, i.e. allocating money/time to *experiences* not to things.  Stuff makes people less or no more happy, and is environmentally bad, and things that give you intrinsic enjoyment (i.e. you do them because you like them) are shown to be healthier for you psychologically than things that give you extrinisic enjoyment (i.e. they impress other people).  He says that experiences often do have extrinsic benefit (you can show off about them on Twitter and Facebook) but that, empirically, experiential things are more likely to be bought for intrisic benefit than physical things are, even if sometimes they are bought partly to show off, so you should not worry too much about the detail and just prioritise experiential things over physical things anyway, as statistically you'll end up with more intrinsic enjoyment.

Sometimes it's hard to tell the difference between the two, Wallman correctly says (you might buy a nice suit both because of the way it feels and the way it looks, and you might go on a weekend away both to absorb it but also to have some interesting pictures and comments to pass on).

 

A really interesting thing Wallman says is that one of the five things that mean a trend or development is likely to take off (he's a professional cultural forecaster) is that it has to be observable by other people so that the mainstream can copy the innovators and early adopters.  So he doesn't think minimalism (another potential rival to materialism) can take off because you can't see volumes of people doing it in day-to-day life (unless you happen to notice someone always wearing the same clothes).  Whereas Facebook and Twitter mean that you *can* see people sharing an experiential life every day.

 

His advice on practical steps was a) get rid of stuff you don't need, b) don't replace it and then c) spend a couple of months spending the same amount of money you'd normally spend on stuff, but spending it on experiences instead.  In practical terms we think we're probably experientialists already to a large degree at Fizz - but we can always do better!

If you're interested in this kind of thing and enjoyed Happy Money, then you should read Stuffocation.  If you're interested in this kind of thing and haven't read Happy Money, read Happy Money and *then* Stuffocation!

www.fizzhq.com

New toy!

I just bought a Fujitsu ScanSnap 510:

It's absolutely brilliant - every office should have one, seriously.  Basically, it scans documents to PDF.  It can do some other things (like scanning to Excel or Word, both of which it does pretty well based on my experimentation so far) but its main use for me is going to be scanning to PDF, as this is a largely paperless office.

Until now, I've been doing that with an old-fashioned flatbed scanner, but that takes ages, particularly with, say, a set of accounts or a tax return.  The ScanSnap has a sheetfeeder that sucks documents in, and scans at 18 pages per minute.  That's right, 18.  Not only that, but it can scan both sides of a sheet simultaneously.  So if the document is double sided it will scan 36 pages a minute!  Unbelievable.

Get one.  Even though it's about £300 plus VAT, it will pay for itself in no time.  If you're fairly paperless at the moment, it will cut down on the time you spend scanning, and if you're not, it will save you loads of time and space if your records are electronic documents rather paper.

www.fizzhq.com

Are you using RSS?

If not, you should be.  It's a fantastic way to make your use of the web more efficient.

There are lots of websites that I look at on a regular basis (insert your own joke here!).  A year ago, I used to  check each of them maybe every day, or every week, or every month, depending on how important it was to me or how much time I had.  If I forgot to check one of "my" sites then I'd miss any new content.

RSS (which stands for Really Simple Syndication) does the checking for you.  A program called a feed reader checks all your favourite websites for updates.  The sites have to be set up to use RSS, but many sites are these days - perhaps most of the sites that you'll want to monitor.  If the site has an RSS feed, it'll have a little orange icon somewhere on it that you can click on.  The feed reader I use is Google Reader, but there are tons of free readers available.

When I start up my web browser (Firefox rather than Internet Explorer, but I'll leave the reasons for that to another article), my homepage is Google Reader.  I've told Reader what sites I want it monitor (some accounting/tax sites, along with a tranche of other sites dealing with various other interests).  Reader shows me how many unread new articles there are on each of the sites I've told it to monitor, like this:

So, rather than checking the HM Revenue & Customs site periodically for updates to its internal manuals, which I used to do to stay abreast of the guidance its Inspectors were being given on thorny issues, Google Reader now alerts me when something is added to relevant section of the HMRC site.  It saves all sorts of time.  Initially you go through an enthusiastic burst of use where you add so many sites' feeds that you can't possibly read them all, but once you've pared it back down to the sites you really want (I've got about 50 sites in my list now), it's brilliant.  Try it, I guarantee you won't look back.

www.fizzhq.com

How to Shave Ten Hours Off Your Work Week

Link: From Where I Sit: How to Shave Ten Hours Off Your Work Week.

A good article advising ways of saving time on pointless tasks.  In particular, this one strikes a chord with me:

Not every project you start is worth finishing. Sometimes we get into it and realize, “This is a waste of time.” Fine, then give yourself permission to quit. I do this all the time with reading. It’s why I am able to read so many articles and books. Here’s publishing’s dirty little secret: most books are not worth finishing.

I finish every book I start, pretty much.  I can't help myself, even if I am constantly complaining to those around me about how boring it is.  A straw poll of my friends indicate they are as bad.  I will try to take this advice in future!

7 rules for communicating clearly and concisely in emails

There's a good article here about efficient emailing.  In particular, I agree completely with the idea that any email should only require one specific response or action from the recipient.  If you ask for three things, there is a fair chance that you won't get a response until all three things have been done.  If you ask for one thing, you'll probably get a response a lot quicker.  If you need three things, send three emails.  That way the easy responses can be made straight away.