Late payment is a cash flow problem, not a personality clash

Almost every sole trader and limited company director in the UK has been there: the work is done, the invoice is out, and the money simply does not arrive. It is easy to take it personally, and easy to let it slide because you do not want to sour the relationship. But an unpaid invoice is effectively an interest-free loan you are making to your client, funded from your own pocket.

Chasing money you have earned is not rude. It is business. The trick is to be systematic, warm in tone but unambiguous about what you expect and by when. This guide sets out a practical approach you can apply this week.

Before you chase, make sure your paperwork is watertight

Nothing undermines a payment chase faster than a client pointing out that the invoice was wrong. Spend ten minutes checking the basics before you send your first reminder:

• Was the invoice sent to the right person or shared inbox, and does it quote a purchase order number if one was required?
• Are your bank details, company name and VAT number correct? A mistyped sort code can sit unnoticed in an accounts department for weeks.
• Does your contract or letter of engagement set out payment terms, and do they match what you invoiced?
• Is the invoice dated correctly, and did you agree a different date in writing?

If the invoice is genuinely faulty, correct it, reissue it and restart the clock. That is fair. If it is not, keep a simple aged debtors list so nothing drifts past 30 days without you noticing.

A reminder sequence that stays polite but gets firmer

Most late payments are admin failures rather than malice. A structured sequence works because it removes the awkwardness of deciding what to say each time.

• One day after the due date: a short, friendly email. Assume oversight. Attach the invoice again and ask for confirmation of the payment date.
• Around day seven: a firmer note. Repeat the invoice number, amount and original due date, and ask for a specific date rather than a vague promise.
• Around day fourteen: pick up the phone. Ask to speak to whoever approves payments, not just your day-to-day contact. Follow up every call with an email summarising what was agreed.
• Around day thirty: a formal letter headed with the account details, stating the amount outstanding, the interest now accruing, and a final date for payment before you consider further action.

Keep everything in writing, log the date of every call, and always finish with a clear next step and deadline. Vague chasing produces vague results.

You can usually charge interest and compensation

Under the Late Payment of Commercial Debts (Interest) Act 1998, businesses can charge interest on overdue commercial invoices. Both sole traders and limited companies count as businesses, so the rules apply whether you are a one-person consultancy or a limited company with employees.

Where no other terms are agreed, interest runs at 8% above the Bank of England base rate, calculated daily from the day after the due date. On top of that, you can claim fixed compensation for the cost of chasing: £40 for debts up to £999.99, £70 for debts between £1,000 and £9,999.99, and £100 for debts of £10,000 or more. Reasonable recovery costs can sometimes be claimed beyond that.

Your contract can set a different rate, provided it offers a substantial remedy. In practice, many small businesses use statutory interest as leverage rather than a genuine income stream. Mentioning it in a firm reminder often unlocks payment faster than actually invoicing for it, and waiving it in exchange for immediate settlement is a perfectly sensible trade.

When it is reasonable to stop work

If reminders are being ignored, pausing work is often the most effective lever you have. Before you down tools, check what your contract says about suspension, and give written notice setting out exactly what is being paused and what will restart it.

For retainers and ongoing projects, pause the deliverables rather than just the behind-the-scenes work, so the client feels the consequence. Where you have a right under the contract to suspend for non-payment, use it clearly and calmly, and confirm the position in writing. If your terms are silent on suspension, take advice before acting, as stopping work without a contractual right can expose you to a claim for breach.

Escalating and stopping the problem happening again

If a formal letter produces nothing, you have options. For smaller sums, the county court's online claims service is straightforward and inexpensive, and many businesses pay as soon as a claim lands on the doormat. For larger debts, a licensed debt recovery agency or a solicitor's letter may be worth the cost. Either way, set a date in your diary and act on it rather than letting the debt age further.

Finally, reduce the odds of a repeat. Ask for a deposit or staged payments, offer a small discount for early settlement, shorten your terms to 7 or 14 days, run a basic credit check on new clients, invoice the day you finish, and add a clear late payment clause to every contract. Build a cash buffer of two to three months of costs so a slow payer is an irritation rather than a crisis. Chasing well is a habit, and it is one worth building early.