Late Payments and How to Get Paid Faster

Recent Sage research revealed that 49% of invoices owed to UK small and medium-sized enterprises are overdue. That’s a big problem, because when clients miss agreed payment deadlines, the resulting cash-flow pressure can affect day-to-day operations, investment plans, and profitability. 

The good news is that UK law provides Small and Medium Enterprises (SMEs) with a number of measures to encourage timely payment, and modern tools can help make it easier for clients to pay promptly. 

Reducing late payments usually starts with clear terms, reliable invoicing processes, and consistent follow-up before problems escalate. Learn how to strengthen each part of your payment process and respond effectively when an invoice becomes overdue to minimise the impact of late payments on your business. 

Here’s what we’ll cover:

How can SMEs encourage clients to pay on time?

To encourage clients to pay invoices faster, make the payment process as straightforward as possible for them, and make the consequences of late payment clear before you begin the work. 

Explain any interest and recovery charges in your contract, and reinforce them on the invoice, so clients understand the financial implications of missing the deadline. This gives clients fewer reasons to delay and makes follow-up conversations more straightforward.

Provide clear payment terms

Clients need to understand when payment is expected and what process they need to follow. Your payment terms should explain the agreed timeframe, such as payment within 14 or 30 days of the invoice date, while the due date gives the client the exact deadline. 

If you haven’t agreed a payment date, the statutory payment deadline is 30 days after the client receives the invoice or you provide the goods or services, whichever happens later. Setting your own terms still gives both parties greater clarity and makes it easier to identify when follow-up should begin. 

Every invoice should include: 

• The payment due date. 
• Payment terms explaining the agreed payment window. 
• Your bank details. 
• The relevant purchase order number. 
• Contact information for invoice queries. 

Present these details clearly and use the same terms across your contract, proposal, and invoice. This reduces the risk of disputes, approval delays, and avoidable back-and-forth with the client’s finance team.

Carry out credit checks

Check a prospective client’s credit history before agreeing to provide significant work on credit. A credit check may help you identify a record of late payment, financial difficulties, or other warning signs that should influence the terms you offer. 

Use the findings to make a proportionate decision rather than automatically rejecting the client. You might set a lower credit limit, request a deposit, or use shorter payment terms for a higher-risk account.

Request a percentage in advance

For projects that require substantial upfront work or expenditure, ask the client to pay a percentage before you begin. The remaining balance can then be linked to agreed milestones or the completion of the work. 

Advance payments reduce the amount at risk and confirm that the client is prepared to commit financially. Explain the schedule clearly in your contract, including the amounts due and the conditions that trigger each payment.

Maintain regular contact with the client

Keep in touch throughout the project instead of waiting until the invoice becomes overdue. Regular communication gives you opportunities to confirm that the client is satisfied, check whether their billing requirements have changed, and resolve disputes before they delay payment. 

It can also help you understand how the client processes invoices. Knowing who approves the work, who handles accounts payable, and when payment runs take place allows you to send the right information to the right person.

Send invoices promptly

The later you send an invoice, the later the client can begin processing it. Delays may be especially significant when a customer has set approval cycles or only runs payments on certain dates. 

Issue invoices as soon as the agreed milestone, delivery, or billing period is complete. Establish a repeatable invoicing process so invoices don’t depend on someone remembering to prepare and send them manually.

Offer convenient payment options

Clients may delay payment when the available method is inconvenient or doesn’t fit their internal process. For example, relying on manual bank transfers alone can create extra steps for customers who prefer card payments or automated collection. 

Offer practical payment options that suit both your business and your clients. Depending on the transaction, this could include bank transfer, card payment, direct debit, or an online payment link.

Monitor payments until funds clear

A payment may have been approved by the client but still take time to reach your account. Processing schedules, bank cut-off times, and intermediary payment systems can all affect when funds become available. 

Set expectations around processing times, and monitor the invoice until the payment has cleared. Integrated payment and accounting tools can help you track payment status more accurately, rather than treating authorisation as completed payment. This distinction matters when you’re forecasting cash flow or deciding whether an invoice requires follow-up.

Understand your rights under UK late-payment rules

Under UK late-payment rules, businesses may be able to claim the following on overdue business-to-business invoices: 

• Statutory interest: you can generally charge interest at 8% above the Bank of England base rate. However, statutory interest may not apply if your contract already specifies a different interest rate. 

• Fixed recovery cost: you may claim a fixed sum for each overdue invoice: £40 for debts below £1,000, £70 for debts from £1,000 to £9,999.99, and £100 for debts of £10,000 or more. 

• Additional debt recovery costs: if the reasonable cost of recovering the debt exceeds the fixed sum, you may be able to claim the difference. This could cover appropriate costs associated with using a debt collection agency or solicitor. 

The possibility of interest and recovery charges will often encourage clients to prioritise your invoice. However, these measures work best alongside accurate invoices, clear payment terms and a consistent reminder process. Before applying any charge, check that it is permitted under your contract and applies to the transaction in question.

How accounting software helps you get paid faster

Accounting software can reduce many of the manual steps that contribute to payment delays. By helping you create accurate invoices, offer convenient ways to pay, and follow up consistently, it supports a more reliable accounts receivable process.

Automated invoicing and e-invoicing

Automated invoicing helps you issue invoices promptly using stored customer and transaction data. This can reduce errors in client details, amounts, payment terms, and purchase order numbers, all of which may otherwise cause an invoice to be rejected or returned for correction. 

Electronic invoicing, often called e-invoicing, can take this further by sending invoice data directly between compatible financial systems. This gives clients the information they need in a structured format and may reduce manual data entry within their accounts payable process. 

You can also schedule recurring invoices or create them automatically when a billing milestone is reached. This helps prevent invoicing from being delayed when your team is busy with other priorities.

Faster payment processing

 Accounting software can connect each invoice to a payment method, such as an online payment link or direct debit instruction. The client can then move from reviewing the invoice to authorising payment without requesting separate payment details or completing unnecessary manual steps. 

Once payment is made, integrated systems can match the transaction to the correct invoice and update its status. This reduces reconciliation work for your team and gives you a more accurate view of which invoices have been paid, have been authorised, or remain outstanding.

Automated follow-up

Following up consistently can be difficult when you’re managing multiple clients and deadlines. Accounting software can send reminders:  

• Before an invoice is due. 
• On the due date. 
• At selected intervals after an invoice becomes overdue. 

You can usually adjust the wording, timing, and frequency of these messages to suit your customer relationships. Early reminders can remain friendly, while later messages can become more direct and refer to the agreed payment terms. 

Automation helps ensure that overdue invoices don’t go unnoticed, but it shouldn’t replace judgement. Review the account before escalating a reminder, particularly when the client has raised a dispute or agreed a revised payment date.

How collecting late payments from clients affects your business

For a small or medium-sized enterprise, delayed income from late payments can disrupt day-to-day decisions and make it harder to plan with confidence. 

Pressure on cash flow

Your business may be profitable on paper but still struggle to meet its immediate commitments if customers don’t pay on time. Without the expected cash coming in, you may find it harder to pay suppliers, wages, tax bills, and other operating costs when they fall due. 

Recent Sage research illustrates how payment delays can spread through supply chains. UK small and medium-sized enterprises now take an average of 37.1 days to pay supplier invoices, up from 31.9 days in the first quarter of 2025. 

The pressure can be greater if your business has already paid for the labour or materials needed to complete the work. You may need to use cash reserves, delay your own payments, or rely on short-term borrowing until the invoice is settled. 

Time spent chasing debtors

Following up on overdue invoices takes time away from activities that generate revenue. You may need to check records, resend documents, contact different members of the client’s finance team, and keep notes on promised payment dates. 

The workload increases when your records aren’t up to date or responsibility for credit control is unclear. A consistent process for tracking invoices and recording client communication can reduce the administrative burden, even when follow-up is still required.

Reduced capacity to invest and grow

Unpredictable payments can make it difficult to commit money to recruitment, equipment, or new business opportunities. You may postpone plans because you can’t be certain that the cash expected from completed work will be available when needed. 

Repeated delays can also leave your business operating defensively. Instead of investing with confidence, you may need to maintain larger cash reserves or avoid valuable opportunities that require upfront spending. 

What should you do when a client doesn’t pay?

When a client is late on a payment, communicate clearly and professionally with them, with the goal of getting paid without the need for legal action. 

Send payment reminders promptly

Don’t wait until an invoice is significantly overdue before following up. A polite reminder shortly before the due date, on the due date itself, and soon after payment becomes overdue can encourage prompt payment while keeping the conversation professional. 

Keep your communication clear and factual. Confirm the invoice number, amount due, payment deadline, and accepted payment methods, and ask whether the client has encountered any issues processing the invoice. Many late payments result from administrative delays rather than an unwillingness to pay, so an early conversation can often resolve the problem quickly. 

If payment is still outstanding after several reminders, increase the frequency and firmness of your communication while remaining professional. Keep a record of reminders, responses, and any revised payment commitments in case further action becomes necessary. 

Refer to your agreed payment terms

Communicate payment terms clearly throughout the invoicing process rather than introducing them only after a payment becomes overdue. For example, include a short late-payment statement near the payment deadline on each invoice and remind the client of the terms when you send a payment reminder.

Treat legal action as a last resort

Consider legal action only after reminders, direct conversations, and reasonable attempts to agree with a solution have failed. Before proceeding, send a clear final demand that states the amount owed, the original due date, and the deadline for payment. 

Compare the likely cost, time, and commercial impact of recovery with the value of the debt. Professional legal or debt recovery advice can help you understand the appropriate next step and whether court action is proportionate. Keep contracts, invoices, and records of communication organised in case you need to demonstrate what was agreed.

Build a more reliable payment process

Late payments can’t always be prevented, but clear terms, prompt invoicing, and consistent follow-up can reduce how often they occur and limit their impact. Review your payment process regularly so you can resolve delays earlier and protect your cash flow. 

Frequently asked questions