Every invoice that’s paid late is cash your business has earned but can’t use. A few late payers can turn a profitable month into a difficult one.
Credit control doesn’t need to be confrontational. Most of it is about being clear from the start, invoicing promptly and following up in a steady, polite way. Here are the basics.
Key points
- Agree clear payment terms before you start work, and put them in writing.
- Send accurate invoices promptly, with everything the customer needs to pay.
- Chase politely and consistently, starting before the due date.
- Businesses can claim interest and debt recovery costs from other businesses that pay late.
- Know when to stop work, escalate or take advice.
On this page
Start with clear terms
The best time to deal with late payment is before you take on the work. Agree your payment terms with the customer, and put them in your quote, contract or terms of business. Say when payment is due, how to pay and what happens if payment is late.
For new customers, especially larger orders, consider asking for a deposit or staged payments. It’s also sensible to carry out basic checks on a new business customer before offering credit.
Invoice promptly and accurately
- Send the invoice as soon as the work is done or the goods are delivered.
- Include a clear invoice number, the date, the due date, what the invoice is for and your bank details.
- Use any purchase order number or reference the customer has given you.
- Send it to the right person. In larger organisations, that’s often an accounts team, not your usual contact.
Small errors give customers a reason to delay. An invoice that’s right first time is much more likely to be paid on time.
Chase politely and consistently
A simple routine works well. Send a friendly reminder a few days before the due date. If payment doesn’t arrive, follow up on the day after it was due, then again a week later. Move from email to a phone call if you don’t get a reply. Keep a note of every contact.
Most late payments aren’t deliberate. Invoices get lost, approvals get stuck or a key person is away. A polite, prompt call often sorts it out. If a customer is struggling, agreeing a payment plan can be better than a long dispute.
Your rights on late payment
If another business pays you late, the law allows you to claim interest and debt recovery costs. If you haven’t agreed a payment date, the law says the payment is late 30 days after the customer gets the invoice or after you deliver the goods or service, if that’s later. GOV.UK explains how charging interest and debt recovery on late commercial payments works.
You don’t have to use these rights, and many businesses don’t want to damage a good relationship. But knowing they exist, and mentioning them in your terms, can encourage prompt payment.
When to escalate
If polite chasing doesn’t work, you have several options. You can pause further work until the account is up to date, send a formal letter before action, use a debt collection service or make a court claim. Which is right depends on the amount, the relationship and the customer’s circumstances. Take advice before starting formal action.
Keep an eye on the numbers
Review your list of unpaid invoices every week or two. Watch for customers who are starting to pay later than they used to, as this can be an early sign of trouble. And if you’re VAT-registered and a debt can’t be recovered, ask us about the rules for reclaiming VAT on bad debts.
Sources
Our main sources are HMRC and GOV.UK:
Talk to us about your cashflow and credit control
We can help you set clear payment terms, set up invoicing and reminders in your bookkeeping software and keep an eye on who owes you money. Call us on 020 7164 0225, send us a WhatsApp message or email us at info@ibandco.co.uk.
You can also read about our bookkeeping and management accounts services.
First published 12 November 2024. Tax content checked on 9 October 2026. This article reflects the rules at the date it was first published. Where something has changed since, we’ve added an update note. Rules and rates change, so please check with us before acting.
Please note: this article is general information based on our understanding of UK tax rules at the date shown above. It is not advice for your circumstances, and tax rules and rates can change. Please speak to us before acting on it.
