Work done, invoice sent, payment… pending. Late payments are one of the biggest cash flow headaches UK small businesses face — and they’re rarely personal. Invoices go unpaid because they’re unclear, terms are vague, or chasing feels awkward. Here’s how to fix all three.
Get the invoice right: what every UK invoice needs
A surprising share of late payments start before the invoice is even sent: incomplete invoices get parked by accounts teams while someone emails you for the missing piece.
- A unique, sequential invoice number
- The invoice date, plus the date you supplied the goods or services
- Your business name, address and contact details
- The customer’s name and address, and a PO number if they use them
- A clear description of what you supplied and the amount due
- Your payment terms and the exact due date
- Your bank details or a payment link
VAT registered? Show your VAT registration number, the rate and the VAT amount. Without a proper VAT invoice your customer can’t reclaim the VAT — a classic reason invoices sit unprocessed. Get it right first time and nothing is left to delay.
Set payment terms that protect your cash flow
Agree terms in writing before work starts, not after. Most small businesses use 14 or 30 days from the invoice date. New customers with no history? A deposit upfront is completely normal, and milestone payments stop big projects becoming one giant unpaid invoice.
The law backs you up more than many owners realise. If no payment date was agreed, payment counts as late 30 days after the customer receives your invoice — or after you deliver the goods or service, if that’s later. Agreed payment periods for business transactions should generally stay within 60 days, and go longer only where it’s fair to both businesses.
One habit beats them all: put the date on the invoice itself. “Please pay by 15 October 2026” gives accounts teams a fixed target — vague phrases like “payment on completion” invite delay.
Chase politely, promptly and consistently
Chasing feels awkward the first few times. It shouldn’t — it’s a normal business process, and most late payers are disorganised rather than dishonest. Use the same ladder each time:
- A friendly reminder the day after the due date — assume it’s an oversight.
- A direct follow-up a week overdue, asking for a firm payment date.
- A written chase at two weeks quoting the invoice number, amount and terms.
- A formal demand, mentioning statutory interest for the first time.
Insight — a chase message that works: “Hi Sarah — a quick nudge that invoice #0142 for £850 was due on 15 September. Could you confirm when payment will be released? Happy to resend the invoice.” Short, factual, easy to answer: no blame, no drama.
Attach a fresh copy of the invoice each time and make paying effortless — bank details or a payment link.
Late payment law: statutory interest and compensation
When reminders stop working, UK law gives you teeth. Late payment legislation lets you charge statutory interest on overdue business-to-business invoices at 8% a year plus the Bank of England base rate. On a £1,000 invoice, every percentage point is worth about £10 a year — modest alone, but it adds up and signals you mean business.
On top of the interest you can claim a fixed sum for recovery costs: £40 for debts up to £999.99, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more — once per late payment.
Three boundaries to know: the rules cover business customers and public authorities, not consumers; a contract interest rate replaces statutory interest; and if you add interest, send the customer a new invoice showing it.
When chasing isn’t enough
If a polite ladder and a formal demand get nothing, escalate calmly. A final demand with a firm deadline comes first. Beyond that: the small claims track (in England and Wales it handles most straightforward disputes up to £10,000), a debt collection agency, or a solicitor — choose on the amount, your evidence and whether you want to keep the customer.
Valid invoice, simply slow customer? Invoice finance advances most of its value upfront for a fee — price it carefully, but it can beat an overdraft for genuinely slow payers.
Prevention is cheaper than every cure: credit-check new customers, take deposits, invoice the day you finish work, and review an aged-debtors report monthly. Good bookkeeping software does this quietly in the background.
Quick answers
When is an invoice officially late in the UK?
If no payment date was agreed, payment is late 30 days after the customer receives the invoice — or after you deliver the goods or service, whichever is later. If you agreed terms, your due date applies — and agreed business-to-business periods should generally stay within 60 days.
What interest can I legally charge a late payer?
For business-to-business debts, late payment legislation lets you charge statutory interest of 8% a year plus the Bank of England base rate. A contract rate replaces it. You can also claim fixed recovery costs of £40, £70 or £100 depending on the debt size.
What information must a UK invoice include?
A unique invoice number, the invoice date, both businesses’ names and addresses, a description of what you supplied, the amount due, and your payment terms and due date. VAT-registered businesses must also show their VAT number and the VAT charged.
How do I chase an unpaid invoice without damaging the relationship?
Start with a short, friendly reminder the day after the due date, follow up directly after a week, then put it in writing quoting the invoice number, amount and terms. Keep it factual — most late payments are admin problems, not bad faith.
Can I charge late fees to consumers?
No — the late payment rules cover business customers and public authorities, not consumer sales, so statutory interest and fixed compensation don’t apply to consumers. Clear consumer terms, deposits and refund policies are your protection there.
Make late payments a thing of the past
Every hour chasing invoices is an hour not spent serving customers. If invoicing, bookkeeping and cash flow admin eat into your week, a Taxora accountant can take the weight off — tidy books that flag overdue invoices, proactive advice and unlimited support from a dedicated personal accountant, from £9.99 a month.
Book a free chat with Taxora or browse our services and pricing — and get paid on time, every time.
This article is general information for UK small businesses and isn’t financial, legal or tax advice. Rules and rates change — speak to a qualified accountant before acting.