How to handle a late invoice payment.

Have you ever been paid late? Have you ever had to chase a customer or business to pay you for a service or goods?

Whether you’re a freelancer, a small business owner or a tradesperson, one of the most frustrating parts of running a business is getting paid on time. It can lead to wasted energy and time, chasing payments that weren’t paid on the date agreed, and lead to unnecessary stress for you and your business.

One in 10 freelancers say they do absolutely nothing when a client doesn’t pay on time. But it’s time to change this. It’s vital that you protect your business, by having a late payment procedure in place and for times when a payment does end up unpaid, that you do chase up unpaid invoices to ensure that you are paid for your hard work.


It all starts with an invoice. You must make sure all work commissioned and required is documented in paper format and given to customers and you keep a copy for your records. You must leave no room for error on an invoice and ensure all details, not only for the work, but your business too are displayed on the invoice.

The UK Government recommend that every invoice you issue needs to include:

  • A unique invoice number
  • The date of invoice
  • Your company details (name, business address and phone/email)
  • The name and address of the customer/business you are invoicing
  • A description of the work you are invoicing for
  • The date you will be supplying the good
  • The total amount you are charging
  • Any VAT being applied (if applicable)
  • The total amount owed (inc VAT).


If you are limited company, then you must remember to display your full company name and address as it appears on the certificate of incorporation.

You can issue invoices as part payments or full job invoices, but make sure your payment terms are highlighted within your terms and conditions, and a copy of your terms is given to the customer/company.


When is a payment late?

A credit period is a period of time a company gives you to make payment for goods. You will have differing credit periods depending if a payment date is agreed upon or not.

A credit period begins either the day the work is completed and goods are delivered or when a customer receives an invoice for payment/the date of payment due – whichever date is the latest.

If you have agreed to a payment date

If you are agreeing to a payment due date with the customer or business, then you need to also make sure to include this due date on the invoice as written evidence. Alternatively, if the job is considerably large, you may find it easier to specify various payment due dates in a contract of which they would sign and agree to.

Once these dates are evidenced and agreed to, this is the date that payment would be due, which should also align with your terms and conditions that are given to the customer.

If you haven’t agreed a payment date

If you haven’t agreed on a payment date and just issued an invoice, then the law states that the payment is deemed late 30 days after either you issue the invoice to the customer or you deliver the goods or provide the service (whichever is later). Making a claim against a customer.


Statutory interest for late payments

You have the right to charge a statutory interest fee onto late payments under the Late Payment of Commercial Debt (interest) Act 1998. You can display this interest fee on your invoices, but it must be stated within your terms and conditions that are given to your customers. They must clearly understand that this fee will apply to invoices that go unpaid.

Talk to the customer

If a customer or company have not paid you on the agreed date or after the credit period has passed, then your first step should always be to contact your customer and enquire after the late payment.

You should never jump to making a claim straight away if an invoice goes unpaid. It’s important that you remain calm and professional when discussing an unpaid invoice with your customer and remember to keep a record of all attempted communication. Every effort should be made to meet a resolution, including if they were unhappy with a job, to try and rectify work or to meet a new agreed payment date, if they cannot currently pay.

Remember to contact your customer in writing, so that you have proof of contact if this late payment does advance to a claim. Remember to include all relevant information within the email or letter.

If they agree to a payment date, do not agree to it over the phone, always make sure that a new payment date is made in writing to you.

When talking doesn’t help

If contacting them doesn’t work or they don’t hold up on their agreement for payment, then it is time to look at alternative options.

If you’re disagreeing on an invoice, you can also try mediation, which involves a third party, who is un-bias to the situation. Hiring a mediator will incur a fee, however this will be cheaper than taking a claim to the small claims court.

Letter of intent

If talking to your customer doesn’t work and you are looking to proceed to making a claim, the first step you should always take is writing a letter of intent to your customer. Within this formal letter, you need to be clear that payment has not been received and that further steps will be taken to reach a resolution if payment is not received by a certain date.

How to make a claim

You can start your claims process online through the Government website or it can be done in paper form. Remember that with any claim you make, you will incur a fee that varies depending on the claim amount.

If you are claiming for a specific amount up to £100,000, you can claim online. But if you are claiming an unspecified amount or the claim amount is over £100,000.01, this must be done in paper form, which can incur a higher fee.

For example, if you are owed between £5,000.01 and £10,000, you will incur a fee of £410 if you make your claim online. Whereas, if you are owed between £500.01 and £1,000, you will incur a fee of £60 if done online.

Once a claim is made, your customer will receive a letter and claim pack from the court, detailing the claim made. They will then have a certain period of time to make a formal response, which can be filed online for convenience. At this point, they will then have the opportunity to pay the full claim, extend the time, state a defence, present a counterclaim, etc.

Following their response, if you still wish to take court action against the customer, you must notify the court within 33 days of their response. Automatic court action cannot be taken; you must state how you would like to proceed with the claim in the small claims court.

You can find out more about the claims procedure for online claims on the Government website.

How to prevent a late payment?

You can learn from a late payment by seeing what went wrong. Did you include everything in your invoices you needed to? Could you have created a contract to enforce payment dates? Did mediation work to avoid court time?

Here are our top 5 tips on how you can prevent a late payment in future:

  1. Take payment when you finish a job on site. If you’ve completed the job and the customer is happy, set up a mobile payment machine that connects with an app/your business bank account or have the customer pay via BACs (online banking).
  2. State your payment due dates. By putting your payment due dates on invoices or contracts, you are clearly stating when payment is due (usually within 30 days of completion) and avoiding any confusion with your customers.
  3. Make sure you have your payment terms clearly laid out in your terms and conditions and ensure the customer has a copy emailed or sent to them via post and that they have read and understood them. If you add interest on for late payments, make sure this is clearly detailed within your terms and conditions, and possibly included on your invoices too.
  4. Don’t delay with issuing your invoices, if you do, it could set the tone for the customer too. Why would they want to pay on time, if you can’t issue an invoice on time?
  5. Utilise apps to help you speed up the invoicing procedure. Certain apps will allow you to email directly to the customer once creating invoice and also help to send payment reminders to your customers.

If at any point you need professional help or advice, then the government offer a Business Support Helpline which you can contact on 0300 456 3565.