Chasing late payment: a credit control routine for a small business
A calm, regular routine for getting paid on time, what UK law allows you to add to a late business invoice, and when to step up from reminders to a formal letter.
By The Osmuch team · · 7 min read
In short
- Agree payment terms before the work starts and print them on every invoice.
- Chase on a fixed routine, starting the day an invoice falls due, not when you remember.
- Make paying easy: a payment link and your bank details on every reminder.
- Between businesses, UK law lets you add statutory interest and a fixed sum to a late invoice.
- A formal letter before court action has rules of its own, especially when the debtor is an individual.
Late payment is one of the biggest pressures on a small business, and most of it is not malice. Invoices get lost, sit in the wrong inbox or wait for somebody to approve them. A steady, polite routine fixes most of it. The rest needs firmer steps, and it helps to know what those are before you need them.
This is general information about UK practice, not legal advice. If you are thinking about court action, or the amount is large, take advice first.
Get the terms right first
Agree when you will be paid before the work starts, and put it on the quote and the invoice: "Payment due within 14 days of the invoice date" is clearer than "net 14". An invoice should also carry a due date, an invoice number, your bank details and the name of the person who ordered the work. An invoice that cannot be matched to an order is the easiest one for a customer's accounts team to put to one side.
A routine, not a mood
Chasing works best when it happens on a schedule rather than when you are worried about cash. A typical routine looks like this:
| When | What |
|---|---|
| A few days before it is due | A friendly reminder that the invoice falls due soon |
| The day it is due | A short note that payment is due today, with a link to pay |
| A week overdue | A reminder that it is now overdue, asking when you can expect payment |
| Two to three weeks overdue | A phone call, and a written note of what was agreed |
| A month overdue | A firmer letter setting out what happens next |
Every reminder should say how much is owed, which invoice it is, when it was due and how to pay. A link that takes the customer straight to a card payment removes the last excuse.
What you can add to a late business invoice
When one business pays another late, the Late Payment of Commercial Debts (Interest) Act 1998 lets the supplier claim statutory interest at 8% above the Bank of England base rate, plus a fixed sum towards the cost of recovering the debt. The fixed sum is £40 for a debt under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more. Where no payment date was agreed, payment is generally due 30 days after the invoice or delivery, whichever is later.
These rights apply between businesses, not to private customers. Many businesses never use them, and a reminder that you are entitled to them is often enough on its own.
Stepping up to a formal letter
If reminders do not work, the next step is a formal letter before action. When the debtor is an individual, including a sole trader, the Pre-Action Protocol for Debt Claims sets out what that letter must contain and what must go with it, including an information sheet and a reply form, and gives the debtor 30 days to respond before court proceedings should start. A letter that leaves something out can count against you later. A debt owed by a limited company follows the more general Practice Direction on Pre-Action Conduct instead.
Keep the relationship where you can
Most customers who pay late will pay, and many will want to work with you again. Stay factual, keep a written record of every reminder and call, and be willing to agree a payment plan that is actually kept. A long-standing customer who is struggling is worth a conversation before a letter.
Questions
Can I charge interest on a late invoice?
If your customer is a business, the Late Payment of Commercial Debts (Interest) Act 1998 lets you claim statutory interest at 8% above the Bank of England base rate, plus a fixed sum of £40, £70 or £100 depending on the size of the debt. For private customers, you can only charge interest if your terms said so.
When should I start chasing an unpaid invoice?
On the day it falls due, with a short, polite reminder and a way to pay. A friendly note a few days before the due date helps too.
What is a letter before action?
A formal letter telling the debtor what is owed and that you may take court action if it is not paid. If the debtor is an individual or sole trader, the Pre-Action Protocol for Debt Claims sets out what it must include and gives them 30 days to respond.
Doing this in Osmuch
Osmuch shows what is owed and how overdue it is, grouped by age, and can send reminders automatically on the interval you choose, each with a link to pay by card if you have connected Stripe and your bank details if you print them on your documents. Every reminder is logged against the invoice. Payments by cash, transfer or cheque are recorded with one press, so a customer who has paid is never chased. For a debt that needs more, Osmuch can prepare a letter of claim from your own records, list what the Pre-Action Protocol needs it to contain and point out anything missing. It does not give legal advice or file anything for you.
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