Getting paid on time starts before the work does. Clear terms agreed at the outset, prompt and accurate invoices, easy ways to pay and a consistent process for chasing make the biggest difference.
Much late payment is not deliberate. It happens because something in the process made it easy to put off.
Agree terms upfront
Set out your payment terms in writing before you start work: when you will invoice, when payment is due and what happens if it is late. Include them in your quote, terms of business or order confirmation, and repeat them on every invoice.
For new customers, run a basic credit check and consider a deposit, especially on larger jobs. For longer projects, stage payments tied to milestones keep cash flowing and limit your exposure.
Invoice promptly and accurately
- Invoice as soon as the work is done or the goods are delivered, not at the end of the month.
- Address the invoice to the right person and include any purchase order number the customer needs.
- Describe the work clearly so the invoice can be approved without questions.
- Show the due date as a date, not just "30 days".
- Include your bank details and payment options.
An invoice that is queried goes to the back of the queue. Getting the detail right first time removes the easiest reason for delay.
Make paying easy
Most cloud accounting software lets you add a payment link to invoices, so customers can pay by card or bank transfer in a few clicks. For regular customers, direct debit takes payment automatically on the due date. The fees are often worth paying for faster, more predictable cash.
Chase consistently
Have a set routine and stick to it:
- A friendly reminder a few days before the due date.
- A reminder the day after the due date.
- A phone call if payment is a week overdue.
- A firmer written reminder referring to your terms and statutory interest.
- A decision on stopping further work or taking formal steps.
Automated reminders from your accounting software handle the early stages without anyone having to remember. A phone call is often the quickest way to find out whether there is a genuine problem.
Your rights on late payment
For business-to-business debts, the Late Payment of Commercial Debts (Interest) Act 1998 allows you to claim statutory interest at 8 percent above Bank of England base rate, plus fixed compensation of £40 for debts under £1,000, £70 for debts of £1,000 to £9,999.99 and £100 for debts of £10,000 or more.
For illustration, if base rate were 4 percent, an invoice of £6,000 paid 60 days late would attract interest of around £118 at 12 percent a year, plus £70 compensation. You do not have to claim, but referring to the right in your terms and reminders often prompts payment.
These rights do not apply to consumers. For consumer customers, rely on clear terms, deposits and payment on or before completion.
Review your debtors
Look at your aged debtors report every week. Note which customers regularly pay late and consider tighter terms, deposits or payment upfront for them. If one customer owes a large share of your outstanding debt, the risk to your cash flow is high.
What to do
- Check that your terms are in writing and appear on every invoice.
- Add a payment link to your invoices.
- Set up automated reminders in your accounting software.
- Review aged debtors weekly and follow up promptly.
- Ask for deposits from new customers and on larger jobs.
If you would like help setting up credit control in your accounting system, book a free call.
