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Customers Not Paying Invoices? What to Do, Step by Step

Small-business owner discussing an overdue invoice

When a customer doesn’t pay, the fastest fix is a fixed routine: check the invoice, send a reminder the day after the due date, phone, add the statutory interest and compensation you are owed, then escalate in writing. Most of the work is not legal. It is remembering who owes what and writing the same awkward email again. We built Execore for that part: you Bcc one address on your invoices, and it tracks what is outstanding and drafts the chase for you to approve.

This guide is for UK freelancers, tradespeople and small business owners who invoice other businesses. It covers the routine, the money you can legally add, and the point at which a court claim makes sense.

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TL;DR

  • Check the invoice, the contract and who received it before you chase. A wrong address or missing detail is a common reason for delay.
  • Chase early, politely and in writing, then pick up the phone. Ask for a payment date, not just “an update”.
  • On business-to-business invoices you can claim statutory interest of 8% over the Bank of England base rate, plus fixed compensation of £40, £70 or £100.
  • If reminders fail, send a formal letter with a deadline, then consider a court claim. Fees start at £35 and rise with the amount.
  • Prevention beats cure: written terms, prompt invoicing and a weekly look at who is overdue.

Table of Contents

Why customers stop paying (and why it is usually not personal)

Late payment is rarely a refusal. The Small Business Commissioner, the UK government body that supports small businesses with payment problems, points out that there can be legitimate reasons for delay, such as financial difficulties or administrative errors. In practice the causes tend to be dull: the invoice went to the wrong person, it is waiting for sign-off, the purchase order number is missing, or it was simply buried in an inbox.

That matters because it shapes your tone. Assume an error or a queue first. Move to firmer language only when the evidence says the customer is avoiding you.

It also matters for your own admin. If chasing means digging through sent folders, spreadsheets and old threads, it gets put off, and an invoice that is not chased on day two is often still unpaid on day sixty.

Step 1: Check the invoice and the terms

Before you contact anyone, confirm your own side is clean. The Small Business Commissioner’s guidance says the first step is to check the original invoice and contract for the payment terms, the due date and any late fee policy, and to make sure no error delayed processing. ICAEW (the professional body for chartered accountants) adds that you should confirm the invoice is correct, sent to the right person and actually received.

A quick checklist:

  1. Is the due date what was agreed, and is it written down anywhere the customer accepted?
  2. Does the invoice carry the customer’s correct company name, address and any PO or reference they require?
  3. Did it go to the person who pays, or to the person who ordered the work?
  4. Do you have proof it was sent, with the date?

Point 4 is where a Bcc habit pays off. Every invoice you send is captured with its date in one place, so you are never reconstructing what went out. We cover this in more detail in how to keep a copy of every invoice you send.

Step 2: Send a polite reminder straight away

Don’t wait for the invoice to feel “really” late. The Commissioner recommends a gentle, professional and friendly reminder that repeats the invoice details: amount, due date and payment instructions.

A reminder that works has four parts:

  • The invoice number, amount and original due date.
  • The invoice attached again, so nobody has to search for it.
  • Exactly how to pay.
  • A question that invites a date, such as “Can you confirm when this will be paid?”

A sample you can adapt:

Hi Sam, a quick note that invoice 1042 for £2,400, due on 3 November, hasn’t reached us yet. I’ve attached a copy in case it went astray. Could you let me know when we can expect payment?

That takes thirty seconds to write once. It takes much longer when you have eight overdue invoices and each needs its own figures. Execore drafts these emails for each overdue invoice, and nothing goes out until you approve it in the review queue, so the tone stays yours.

Step 3: Phone, then follow up in writing

If the reminder gets no reply, the Commissioner’s next step is to contact the customer directly, by phone or in person to discuss the problem. ICAEW describes the informal stage as calling or emailing to say payment is overdue and reminding them you can take further action, including charging interest or stopping supply.

On the call, aim for one outcome: a specific date. “I’ll look into it” is not an answer. Ask:

  • Have you received the invoice, and is anything stopping it being paid?
  • Who approves it, and when does the next payment run happen?
  • Can you confirm a payment date today?

Then send a short email straight afterwards repeating what was agreed. That message is your record, and it turns a vague promise into something you can point to if you have to escalate.

If you chase several customers weekly, the cadence matters more than the wording. A reminder on day one, a second a week later, a call, then a firm notice keeps pressure steady without it feeling like harassment. Many invoicing tools cap how many automatic reminders they send; if that has bitten you, see our notes on chasing beyond the reminder limit in Xero and sending more reminders in QuickBooks.

Step 4: Add the interest and compensation you are owed

This is the step most small businesses skip, and it changes the conversation. Under the Late Payment of Commercial Debts (Interest) Act 1998, a business that supplies goods or services to another business can claim fixed compensation for recovery costs on top of interest:

Size of the debt Fixed compensation per invoice
Under £1,000 £40
£1,000 to under £10,000 £70
£10,000 or more £100

If your reasonable costs of recovering the debt exceed that fixed sum, the Act also entitles you to claim the difference.

Interest is separate. For commercial transactions, statutory interest is 8% above the Bank of England base rate, running from the day after payment was due, unless your contract sets a different rate. The base rate changes when the Bank of England’s Monetary Policy Committee announces a decision, so always use the figure in force for the period the debt was overdue.

A worked example

Take a £2,400 invoice that is 14 days overdue. Suppose, purely for illustration, that the base rate were 4%, giving a statutory rate of 12% a year.

  • Interest: £2,400 × 12% ÷ 365 × 14 days = about £11.05.
  • Compensation: £70, because the debt is between £1,000 and £10,000.
  • Total added: about £81.05, on top of the £2,400.

The sums are small at 14 days but grow daily, and the compensation is due once per invoice however late it is. Many customers pay quickly once they see a line for it. The Commissioner also offers an interest calculator for checking your figures.

The Commissioner’s advice is that if the matter is still unresolved after you have contacted the customer and followed their escalation process, you can raise a separate invoice for the late payment charges. Our guide to charging interest on a late invoice walks through the wording.

Check your contract first: it can set its own rate, so the statutory figures apply where it does not. And the rules cover business-to-business supply, not sales to consumers.

Step 5: Send a formal letter

If friendly chasing and the interest notice both fail, move to a formal letter, often called a letter before action. It is the last written warning before a court claim. It should include:

  • The invoice details and the total now owed, with interest and compensation shown separately.
  • A clear deadline, commonly 14 days, by which you expect payment.
  • A statement that you will start court proceedings if it is not paid.
  • Copies of the invoice, the contract or agreed terms and your earlier chasing.

Keep it factual. A short, accurate letter reads as more serious than a long angry one, and it shows a judge you gave the customer every chance. If the sum is large or the customer disputes the work itself, take advice from a solicitor before sending anything formal.

If the customer says they cannot pay, ask for a payment plan in writing with dates. A part-payment on a firm schedule is often better than a dispute that takes months. And if the customer is a large business, the rules are tightening: the Commissioner’s 24 March 2026 announcement describes new powers to fine persistent late payers among large firms and to settle disputes out of court through adjudication.

Step 6: When a court claim makes sense

A claim makes sense when the debt is undisputed or well documented, the customer has ignored your letter, and the sum justifies the fee. For most small invoices, that means the money claim route through the county court.

The fee depends on the amount. According to GOV.UK’s court fee table, it starts at £35 for claims up to £300, is £115 for £1,500.01 to £3,000, £205 for £3,000.01 to £5,000 and £455 for £5,000.01 to £10,000, and is 5% of the claim above that. The fee is calculated on the claim including interest, so our £2,400 example would cost £115 to issue. Fees are reviewed from time to time, so check the page before you file.

Before you file, gather:

  1. The invoice and the agreed terms or quote.
  2. Proof of delivery or completion of the work.
  3. Your reminders, call notes and the formal letter, with dates.
  4. A calculation of interest and compensation.

Notice how much of that is simply a record. If every invoice and every chase is stored with its date, assembling the bundle takes minutes. If it lives across three inboxes and a notebook, it takes an afternoon.

Debts above a certain size or with a dispute about quality may need legal advice. For anything contested, speak to a solicitor before you issue.

Step 6: When a court claim makes sense

Preventing the next late payment

Most recurring late payers are made, not born. The Commissioner’s good payment practice guidance says typical terms are 30 days from receipt of the invoice and that terms should not exceed 60 days. It also advises you to:

  • Agree payment terms in writing before work starts.
  • Invoice as soon as the goods or services are delivered.
  • Put correct details on the invoice and send it to the right department or portal.
  • Ask for acknowledgement that it has arrived.
  • Consider credit checks and staged payments for bigger jobs.
  • Make contact promptly when an invoice becomes overdue.

Terms matter too. The Commissioner’s payment rights guide says standard business-to-business terms should generally be capped at 60 days, and longer is unacceptable unless both sides expressly agree and it is not grossly unfair to the supplier.

For more ways to shorten the wait, see our guide to getting paid faster, and our full walk-through of recovering unpaid invoices. If you want to see your position before problems start, cash flow visibility is the habit to build.

Where Execore fits

If you already issue invoices from your usual tool, you don’t need to replace it. With Execore you Bcc your unique address on every invoice you send, and it captures them, tracks what is outstanding and highlights what is overdue. For each overdue invoice it drafts a chase email, including the statutory late-payment interest and compensation calculation, and puts it in a review queue. Nothing is sent or paid until you approve it.

It also calculates your net cash position for the next 30 days, so you can see whether the unpaid £2,400 is the difference between covering a bill and missing it. Incoming bills can be forwarded to the same system, and you can export a payment file for payables without connecting a bank account.

There is a Free plan, and a Business plan at £29 per month for higher document limits and advanced automation. You can compare them on the pricing page, or start at execore.co.uk.

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Our view: the problem is memory, not manners

Most of the small businesses we talk about this with are not bad at asking for money. They are busy. An invoice goes out, the next job starts, and nobody looks at the unpaid list until cash gets tight.

That is why we built Execore around the invoice you already send. You don’t change your invoicing software, connect a bank or install anything. You Bcc an address, and the chasing starts from what you have actually sent.

We also think the draft should be yours to approve. A chase email to a long-standing customer needs a different tone from one to a repeat offender, so Execore drafts and nothing goes out until you say so. The statutory interest and compensation are worked out for you, so the firmer message is ready when you need it.

The goal is simple: a clear view of who owes you and what you can count on over the next 30 days, so you are paid before the bills and tax deadlines arrive.

the author

FAQ

How long should I wait before chasing an unpaid invoice?

Not long. Send a friendly reminder shortly after the due date passes, then call if there is no reply. The official guidance is to start gently and escalate only if needed. An early, polite nudge catches the many invoices that were simply missed.

What happens if a customer ignores an invoice?

If the customer is another business, you can claim statutory interest and fixed compensation of £40, £70 or £100 under the 1998 Act. If they still ignore you, a formal letter and then a court claim are the next steps. The customer can also face a county court judgment if you win.

Can I charge interest on a late invoice?

Yes, on business-to-business invoices. Statutory interest is 8% over the Bank of England base rate from the day after payment was due, unless your contract sets another rate. Compensation is added per invoice. It does not apply to sales to consumers.

When should I take a customer to court?

When the debt is clear, the customer has ignored your written warning and the amount outweighs the fee. Fees start at £35 for claims up to £300 and rise with the sum. If the customer disputes the work itself, take advice from a solicitor first.

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