Induction packs can cut invoicing errors – here’s why you should use them

Small Business Commissioner Liz Barclay argues businesses should be using induction packs to help suppliers get paid.

Getting paid requires effort, organization and often persistence on the part of suppliers and sometimes they get it wrong. That in turn allows the debtor to delay paying them. However, if not getting paid means they go bust, no one wins.

Accountants can create change

As accountants, you work with both large and small organisations, employers and suppliers, and so are ideally placed to help each understand the needs of the other.

Most of us who have taken the plunge and work for ourselves, do it because we love what we do. What we don’t necessarily love is all the paperwork and processes that should go alongside that, and we can fail to create a professional operation where the business bit is given the same priority as the creative bit.

An employer organisation wants the talent, creativity, innovative approach, and agility that the small firm or the freelancer offers, but they also need to make it easy for that firm to work with them. It pays a bigger customer to help a small supplier put all the correct processes in place from the beginning of their working partnership.

Induction packs and partnership working

Many bigger customers produce induction packs (example below) to help any small suppliers they sign up with to understand their payment processes. It makes sense and is something accountants could advocate.

A small supplier may be working with several different customers all with different processes. They may not have a dedicated person to do the invoicing and chasing of payments –  the person doing the work may even handle it themselves.

So an induction pack can make it easy for such companies to keep on top of the detail, which helps both them and the employer.

The induction should include information such as:

• how to get a Purchase Order number if one is needed,
• who the contact person is in the payment department for that particular supplier
• the dates on which the employer pays suppliers

It should also highlight key terms and explain them in a clear and transparent way.

Does 30 days mean 30 days after the invoice is received? Or does it mean 30 days after the end of the month in which it is received?

Small firms need certainty more than anything else or they don’t have the confidence to invest, update, recruit, grow. You client will want the best supplier, so it will pay them to create the conditions in which its partners can flourish.

Pragmatism and flexibility

An induction pack should not be an excuse to apply the letter of the law to processing payments.

Research from 2019 showed that about 4 in 10 invoices were submitted with errors. If your client receives an invoice with errors the instinct may be to consign it to an in tray until the supplier chases payment. That can be counter productive for everyone. Why not pay the invoice and ask for it to be resubmitted with the errors corrected? It benefits the employer to work in partnership with their suppliers. At the Office of the Small Business Commissioner, we hear from larger firms who say that changing their payment practices in this way has improved their company culture.

Capture the detail

Every detail of the work and the payment terms should be written down in case there is a disagreement later. There’s a contract even if it’s verbal but if it’s not written, what’s been agreed is very difficult to pin down. Your client could end up in a costly time-consuming dispute.

If a small supplier is presented with a convoluted, legalistic contract, as an accountant you should advise them to refuse to sign until everything has been clearly explained to their satisfaction. Imposing terms on a supplier is a sure way to encourage them to take their talents and go and work for a rival. As skills shortages bite that’s something that your clients may want to guard against.   

Adjust terms

Suppliers need to know when they’ll be paid and may need payment earlier than the employer’s standards terms. But small firms can be scared to push back because they feel that the bigger customer will go elsewhere.

Your clients need to know that smaller suppliers may not be able to pay their own bills or have an income if they have to wait 120 days to be paid. They may have no choice but to turn down work and find customers who pay much quicker. 30 days after the work is delivered is fair. Using a small supplier to pay for a bigger firm’s R&D is not.  

We tell small firms that if the payment is late, they should chase it up straight away. If a firm is a poor payer there will be time and money wasted paying people just to field calls, and finding new suppliers to replace the ones they’ve broken. Everyone benefits if payments are made on time. Good payers are seen as ethical companies that investors are willing to invest in and skilled people want to work for as employees as well as suppliers. Trust and reputation are hard to build up and very easy to lose.

We advise small suppliers to check out the reputation of the bigger customer before accepting an offer of work. There is a plethora of information out there that can help them make better decisions about who to work with, such as credit reference agencies, the Prompt Payment Code, the BEIS publicly available data and business organisations or trade associations. It may feel wrong to a small business owner to turn down work but avoiding a poor paying customer and a dispute over payments will ultimately make their lives easier and could save their businesses. You clients should aspire to be on the good payer list.

If small firms do ultimately get into a dispute and the customer refuses to pay, they can get help from us at the OSBC.

Example Policy for the Employment of Freelancers

This Policy was introduced in ……… and we are working to implement it. If this isn’t your experience of working with us, please talk to us.

1. Context

We recognise the vital role freelance workers play in the cultural sector, and how much we have to gain from these relationships. We believe it is important to acknowledge the challenges that freelancers face that are not shared by salaried staff, and to find ways of providing employment on a more equitable basis. This policy sets out our commitment.

2. Policy

XXX employs artists, practitioners and other creative staff on a freelance basis, primarily to deliver creative learning activity, develop artistic work with us or to work on productions in collaboration with our Associate Artists and Companies.

We are committed to treating freelancers fairly and respectfully, recognising that you do not benefit from the same terms and conditions as salaried staff. We recognise that we are dependent on the artistic output of freelance staff to maintain XXX’s artistic offer, and seek to establish a more balanced, symbiotic relationship.

This commitment is demonstrated by the following:

2.1 Supporting artists and freelancers

Applying to us

• We aim to streamline application processes whilst ensuring they are accessible to all. We will always advertise the timeline of deadlines, shortlisting, interviews and appointments. Where possible we aim to offer feedback on applications.

Approaching us for development support, programming and commissions

• We want our processes to be as transparent as possible and we regularly publish information on our website about opportunities and how to contact us. You can read our artistic policy for guidelines on what we are looking for and how to approach us. We aim to reply to everyone who contacts us directly about opportunities, and you can expect us to be honest with you about whether a) your work is likely to fit our artistic policy priorities, or b) your work fits in with our timelines for planning and programming.

Contact and Communication

• Freelancers will always have a named point of contact within the organisation, and access to other staff to support their work and practice.

• We value freelancers’ time and will seek to streamline contact time and meetings, and save travel time and costs by offering opportunities to talk by phone or meet online.

• If we are contracting you on a freelance basis to deliver a programme of work for XXX, you will be given a written brief and a line manager. We will discuss all relevant areas of delivery expected from both of us.

• Freelancers working regularly with us become part of the fabric of who we are and will be included in relevant organisation-wide communication, invited to all-staff meetings and special events.

• We like to plan well in advance and for all activities to run smoothly and as stress free as possible for all involved. This means that freelancers should expect to be asked about the arrangements for your activity in advance of delivery, to enable rooms, equipment, refreshments etc to be set up prior to the start of your activity.

• For larger scale events and productions, it is likely we will put a team together including technical, programming, front of house and event support. We will work with you to ensure that the level of support we can offer and any associated costs are clear and agreed in advance.

Correspondence

• Most of our correspondence takes place by email and we aim to reply to emails from artists and freelancers we are working with, wherever possible within 10 working days. We aim to reply to emails from artists and freelancers new to us within 20 working days.

Administration

• We acknowledge how time consuming administration is and will always look at ways to keep this to a minimum for freelancers in areas such as applications, contracts and information based forms.

DBS

• We may require you to have an up to date DBS check to carry out your work with us. If so, we can make arrangements for this.

Professional Development and Training

• If we offer freelancers support and training, we will always be clear about what that is, and when it will be available.

• Wherever possible, we will open up training sessions available to salaried staff to freelancers who work regularly with us.

• Freelancers working with us are offered an opportunity to observe a Board meeting. This is part of our wider commitment to operate as transparently as possible, reduce the mystique around boards, and equip more artists and freelancers with the knowledge and experience that might encourage you to apply to boards in the future.

Resources

• We will make XXX’s resources available to freelancers working with us, including access to office space and printing facilities, workspace and equipment.

• We know how important it is to feel comfortable and like you have a base in a building so whilst working at XXX, freelancers will have access to a Green Room which is equipped with a fridge, kettle and microwave.

Orientation

• If you are new to XXX, we will give you a welcome and a guided tour of the building when you arrive to begin work. We will largely leave you to get on with your work but your named person will be on hand for queries and questions.

Access Requirements

• We will ask if freelancers have any access requirements when we start working with you. We endeavour to meet the access requirements of all members of staff, including freelancers, and to fulfil access riders.

2.2 Other terms and conditions

Fees and Payments

• XXX prioritises paying freelancers as quickly as possible, and definitely within 14 days of receipt of invoice.

• We do not require freelancers to fill out supplier forms, but will make payments providing an invoice with the following information is provided at least seven days before payment is due:
– Contact details including email and phone number
– Date, nature of work undertaken and agreed fee
– Bank or building society account details, to enable electronic payments

• We always agree fees and payment schedules in advance and are honest and upfront about what we can afford. We expect freelancers to scale the activity to fit within the available fee, not to reduce your fee or work unpaid hours. We want freelancers to tell us if our expectations are bigger than the fee available.

• We acknowledge that freelancers have to make provision for your own sick pay, holiday pay, pension, training and development and other costs within your fees, so we expect rates to be higher than the salaried equivalent.

• Freelance staff are responsible for your own tax and National Insurance. We will ask you to confirm this on your invoice together with your Unique Tax Reference (UTR) number.

• We do not expect freelancers to cashflow XXX’s activity. We will arrange advance payment or part-payment where appropriate and either pay directly or repay expenses as soon as possible.

Planning and Agreements

• We will always agree fees, arrangements, responsibilities, timescales and deadlines for activity in writing. This will not always be a formal contract but may take the form of a letter of agreement or email exchange. We are happy to provide more formal paperwork if requested.

• If delivery circumstances change, for XXX or for freelance staff, we will try and find alternative ways for freelancers to engage in your contracted work and receive payment as planned, providing alternatives (streaming, blended delivery, online) are appropriate, practical and possible for the purpose of the work.

Postponements and Cancellations

• We will always agree in writing and in advance what will happen in terms of fees if the activity is postponed or cancelled.

Policies and Information

• Where relevant, we will share our Safeguarding Policy with freelancers in advance of starting work, and arrange safeguarding training and DBS checks when required.

When things go wrong

• Sometimes things go wrong. We hope our own systems will pick this up, or that by establishing honest relationships based on trust, freelancers will be able to tell us if something goes wrong. Any issues can be raised with your main point of contact or directly with XXX’s Chief Executive. We will always respond.

Liz Barclay Liz was appointed the role of Small Business Commissioner in July 2021 to spearhead the national effort to crackdown on poor payment practices which cause thousands of small businesses to close every year..