Chasing late invoices without losing the client

Nobody starts a business because they enjoy asking to be paid. Yet for most small businesses, late payment is not an occasional crisis but background weather — and the difference between the businesses it sinks and the businesses it merely irritates is rarely luck. It is a system.

Two facts make the system easier to build. First, most late payment is disorganisation, not malice: an invoice missing a purchase-order number, an approver on holiday, a finance inbox nobody reads. Second, the law is quietly on your side — more so than most sole traders realise. Chase on that basis: calm, assuming good faith, and impossible to ignore.

Prevention beats chasing

• Agree payment terms in writing before the work starts — how many days, from when, and to which account. If nothing is agreed, the law treats a business-to-business payment as late 30 days after the invoice or the delivery of the goods or service, whichever is later.
• Invoice immediately. Every day between finishing the work and sending the invoice is a day added to your wait, at your expense.
• Get the invoice right first time. Correct legal name, PO number if they use them, itemised amounts, bank details, due date stated as a date rather than "net 30".
• Make paying easy. Bank details on the invoice itself; a payment link if you can offer one.
• Take deposits on large jobs. A client unwilling to pay anything up front is telling you something.

The escalation ladder

The power of a ladder is that each step is small, predictable and defensible — you are never the unreasonable one.

1. A few days before the due date: a short, friendly note — "just flagging invoice 118 is due Friday; shout if anything's missing on it." This catches the missing-PO problems while they are still free to fix.
2. The day after the due date: a polite reminder with the invoice re-attached. No apology, no accusation. "Invoice 118 fell due yesterday — could you let me know when it's scheduled for payment?"
3. Seven days overdue: a firmer email. Ask directly whether there is a problem with the invoice, and ask for a payment date.
4. Fourteen days overdue: pick up the phone. A two-minute conversation unblocks more invoices than a month of emails. Be warm, be specific, leave with a date.
5. Twenty-one to thirty days overdue: send a statement of account and state, matter-of-factly, that you reserve the right to claim statutory interest and compensation on late commercial payments. This is not a threat; it is information, and it changes behaviour.
6. The letter before action: a final formal letter setting out the amount owed, the deadline (fourteen days is conventional), and that you will begin court proceedings if unpaid. Send it expecting to follow through.
7. Action: for straightforward debts, a money claim can be issued online, and mediation is often offered along the way. Weigh the amount against the effort — but remember that businesses which are known to follow through get paid first next time.

Write the ladder down and date each step in your calendar the day you send the invoice. A chase that happens automatically on schedule feels procedural to the client; one that erupts after weeks of silence feels personal to everyone.

Your statutory rights, plainly

The Late Payment of Commercial Debts (Interest) Act 1998 gives businesses supplying other businesses the right — without any clause in the contract — to:

• statutory interest at 8% above the Bank of England base rate on the overdue amount (check the current base rate);
• fixed compensation per late invoice: £40 for debts under £1,000, £70 for debts from £1,000 to £9,999.99, and £100 for debts of £10,000 or more; and
• reasonable further recovery costs beyond the fixed sum.

You are never obliged to charge any of it, and many businesses rarely do. The value is leverage: a supplier who calmly knows their rights is treated differently from one who can be strung along indefinitely. Note the Act covers business-to-business debts — consumer work relies on your contract terms instead, which is a good reason to have some.

Keeping the relationship

• Blame the process, not the person. "Our system flags overdue accounts automatically" lets everyone save face — and once your bookkeeping genuinely does flag them, it is also true.
• Offer structure before sacrifice. A payment plan with dates you actually enforce beats a discount for a client in genuine difficulty — and tells you early if the difficulty is worse than admitted.
• Know your stop line. Decide in advance how overdue an account can be before new work pauses. Saying it early ("we pause new work at 30 days overdue — company policy") is kinder than a sudden refusal later.
• Let serial offenders go. A client who pays at 90 days is lending your money to themselves at your expense. Some revenue costs more than it brings.

The bookkeeping connection

None of this works if you do not reliably know who owes you what, and how old each debt is. That is not a personality trait; it is a ledger. With your books kept current — every invoice, payment and part-payment recorded as it happens under our standing model, AI drafts. AgentLedger validates. People approve. — the aged-debt picture is simply there, every day, and chasing becomes routine administration instead of a periodic act of courage.

If you would like your invoicing and books kept tight enough that late payers stand out immediately, Ask for Details.