How to chase late payments

Why do invoices get paid late?

Mostly because nobody at the customer is looking at them. The invoice went to the project manager instead of accounts, it was missing a purchase order number, it arrived after the monthly payment run closed, or it is sitting in an approval queue. A smaller share are genuine cash flow problems, and a smaller share still are customers who pay late on principle because nobody chases. The sequence below is designed to separate the three quickly and to leave a paper trail that stands up in court if it comes to that. It assumes you invoiced properly in the first place: see how to invoice as a sole trader for the due date, bank details and PO number that prevent most of this.

What is the chasing sequence?

Keep every message short, factual and polite. Quote the invoice number, the amount and the original due date in each one, and send each stage to the same email address so the thread shows the history. Do not threaten anything you will not do. If a customer offers a payment plan, accept it in writing with dates and amounts, and restart the sequence the day an instalment is missed.

What interest and compensation can I charge?

If your customer is a business, the Late Payment of Commercial Debts (Interest) Act 1998 gives you two things without any clause in your contract: statutory interest at 8% above the Bank of England base rate, and a fixed compensation sum per invoice. The base rate used is the one in force on 30 June or 31 December before the invoice fell due, so it is fixed for the whole half-year.

Worked example: a £5,000 invoice fell due in the second half of 2026 and is paid 60 days late. Interest is £5,000 × 11.75% ÷ 365 × 60 = £96.58. Compensation on a debt of that size is £70. The customer owes £5,166.58 in total. The late payment interest calculator works it out for any dates, including a debt that spans two half-years, and prints the figures for your letter. Interest is simple, not compound, and it keeps running until the day the money arrives, so update the figure in each letter.

Mention the interest in the day 14 reminder and claim it in the letter before action. Many businesses waive it once the invoice is paid, which is a reasonable commercial decision; the point is that the customer knows the cost of delay. You cannot charge statutory interest to a consumer, only to businesses and public bodies, and if your contract already contains its own late payment interest clause that gives a substantial remedy, the contract rate applies instead.

What goes in a letter before action?

• Your details and the customer’s, and the words “letter before action” or “letter before claim”.
• A statement of account: each invoice number, date, due date and amount, plus interest and compensation to date and the daily interest figure.
• What you want: payment of the total by a clear date, normally 14 days away.
• What happens otherwise: a county court claim for the debt, interest, compensation and court fees, without further notice.
• How to pay, with your bank details, and how to contact you if they dispute the debt.

If the customer is a sole trader or an individual rather than a company, the Pre-Action Protocol for Debt Claims applies and the letter must give 30 days and enclose a reply form and an information sheet; the court will expect to see that you followed it. Send the letter by email and by post, and keep proof of posting.

How do I take a customer to court?

For an undisputed debt, Money Claim Online is the usual route in England and Wales. You complete the claim form online, pay a court fee based on the amount claimed, and the customer has 14 days to respond. If they do not, you ask for judgment in default and can then enforce it, for example through bailiffs or an attachment of earnings. Most invoice debts fall within the small claims track, which is designed to be used without a solicitor and where each side normally pays its own costs. Scotland and Northern Ireland have their own simple procedure and small claims routes. A county court judgment against a company is public and affects its credit rating, which is why the letter before action so often produces payment on its own.

How do I stop it happening again?

• Credit check new business customers before offering terms; it costs a few pounds.
• Take a deposit on any job with materials, and invoice in stages on long projects.
• Put the due date, bank details, PO number and the statutory interest wording on every invoice.
• Invoice the day the work finishes, to the accounts email address, and ask for confirmation of receipt.
• Chase on day 1, every time. Customers learn quickly who checks.
• Stop work on a customer whose previous invoice is overdue, and say so politely.

If part of an invoice is genuinely disputed, agree the undisputed part and get that paid while you resolve the rest; a credit note for the disputed element and a fresh invoice for the balance keeps your records clean and removes the customer’s reason not to pay anything at all.