Getting Paid as a Sole Trader

SMEs Advice 26 April 2022
Getting Paid as a Sole Trader


Creating invoices, getting paid on time, and what to do if things go awry. When it comes to self-employment and finances, there's a lot to consider beyond simply setting your fees. We're here to lend a helping hand. 

Being self-employed comes with a huge number of benefits. From choosing the types of projects you take on, to the way you deliver for your clients, to the hours you work - professional and creative freedoms can be a real driving factor for being your own boss.

But like anything, there are a few downsides. When your accounting department is you and you alone, the prospect of handling all-things-money isn't always easy - particularly when it comes to getting paid.

We believe that just because you're self-employed, doesn't mean your financial wellbeing should suffer. Here's how to manage the conversation around pound notes with your clients and ensure you get paid as a sole trader.


Getting the details right

Once your client's signed off on your project fee and the work's complete, you'll need to create an invoice for them - promptly. Most invoices are simple: details of the work undertaken, the fee (plus any expenses you've agreed to charge to your client), bank details, a reference, and addresses.

However, there are some exceptions to this, particularly if you're working with overseas clients. Many companies trading in Germany, for example, have a stronger due diligence process when it comes to invoicing and will need further details.

This might include:

  • the full-service period your work was completed in
  • information on whether you are VAT registered or not
  • the BIC/SWIFT code of your receiving bank

At the end of the day, your client will be able to advise on the type of information they need in order to process your invoice swiftly, smoothly, and efficiently. The clearer the invoice, the more likely you are to receive payment in a timely manner.


Your invoice has been processed – so what’s next?

As a sole trader, you’re entitled to keep all the monies you make through your work. You might have fees of your own to pay for vendors, suppliers, or software tools but unlike a limited company or SME, each and every penny comes directly to you.

There’s no one way to manage your finances, and finding what works best for you is an important step in the self-employment journey. Some sole traders choose to open a business account, separate from their personal banking account. This could provide you with a simple way to keep track of transactions, including paying yourself and others.

Of course, being self-employed also means managing your Self Assessment and tax payments. Unlike PAYE where your tax is split over your paycheques, sole traders will be presented with a lump sum tax bill. This can make budgeting challenging - though not impossible. Our thoughts? You might want to keep a set amount of your paid invoices aside each month to help out on this. When it comes to paying that tax, you’ll be thanking yourself.


Not been paid?

The big one

It's been 30 days and your payment hasn't appeared in your bank account. The payment terms were set, the invoice details are correct, and there's been no contest to the work you provided. So what can you do?

Luckily, you're not the first person to experience this - and you're not without your rights. As a sole trader, there are a number of steps you can take to ensure you get your payment: 

  1. Speak with your client. Yes, an obvious step but if there's been an error and they haven't communicated this to you, it could mean a quick fix. This will also give you the chance to establish a better process for the future - like sending invoices directly to their accounts team.
  2. Serve a 'statutory demand'. Still no luck? You may have the right to serve your client with a 'statutory demand' for the payment. They then have 21 days to respond to you, either by paying the amount or reaching an agreement as to how they will pay the amount.
  3. Apply late fees. Regardless of whether you're self-employed or not, you might be eligible for charging late fees to your client if payment hasn't been made past the 28-day mark. This is known as HMRC's 'statutory interest' and can help you recover costs associated with late fees.

Introducing a third party, such as a solicitor, or taking your client to small claims court could be an option for you if you're still unable to recover payment.

It's worth noting that while serving notice of claims court might be enough to jolt businesses, it isn't always a given, and these steps can come with a good deal of work for you. If your payment is significant, it could be a good use of your time and resources. If not, you may need to consider what the best way to move forward is for you.


Being a sole trader can come with its challenges - let us help

Managing professional finances is time-consuming at the best of times. But whether you're self-employed or SME, there are simpler ways of making sure the pounds and pennies are working for you. We offer a range of solutions from business accounts, to international payments, to merchant accounts. 



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