How to manage late payers

Esther Shaw / 20 April 2015 ( 01 November 2016 )

Customers who fail to pay their invoices on time can wreak havoc with your business' cash flow. Esther Shaw explains what you can do to chase overdue invoices and help ensure that you do get paid.



Running your own business can be fraught with issues, and one of the biggest frustrations can be customers who fail to pay their invoices on time.

This is a common complaint for any small business, as late payments can wreak havoc with cash-flow.

So what can you do to chase overdue invoices and help ensure that you do get paid?

Check your clients' and suppliers' credit reports with Experian's pay-as-you-go service

Be clear about your expectations at the outset

When you take on any new client, make sure you set out payment terms as early as possible on every invoice.

Explain timeframes, and when you expect invoices to be settled.

You could also consider offering incentives – such as a small discount for early payments.

Want to avoid bad payers? You can protect your business by credit checking customers and suppliers. 

Try to settle the matter amicably

While late payments may leave you feeling angry, make sure you broach the issue very carefully with your client so as not to burn any bridges.

For example, when you first chase, try adding a friendly note to the original email and forward this on.

Don’t forget that some missed payments are simply down to someone forgetting to put a payment through. In that scenario, a gentle reminder may be all that is needed.

Think about when it’s fair to start chasing payment

If you have set a 30-day payment term and not received payment in that time, leave it a few days before you contact the client to chase the money you are owed.

Equally, don’t leave it too long, or you risk dropping down their list of priorities.

Send multiple reminders

If a client fails to respond to your first attempt to chase a late payment, you need to be persistent.

This might mean sending out a series of reminders, such as an email once every seven days.

If you’ve sent a few email reminders but still not received payment, it may be time to pick up the phone.

A personal phone call is often the most effective way to chase an outstanding invoice, and should mean you get a more direct answer.

Keep a note of each contact

If you do end up sending a flurry of letters or emails asking for payment, make sure you keep a note of each contact.

Also keep written notes of any phone calls made.

Claim interest on late payments

One way to protect yourself against late payers is by charging interest on those payments.

As a business owner, you have a statutory right to claim interest on late payments at eight per cent over the Bank of England base rate.

If you do plan to claim interest in this way, make sure you inform new clients about this upfront.

Make use of the Money Claim Online service

If you want to take court action against someone who owes you money, you can do this over the internet via the Money Claim Online (MCOL) service.

This service, run by HM Courts and Tribunal Service, is a convenient and secure way of making a claim for a fixed sum under £100,000.

Did you know that if your business is late with payments, it could affect its credit report? Find out more.

Employ a debt-collection agency

As a last resort, you may want to hand the matter over to a debt-collection agency.

Using one of these firms can be a less confrontational way of chasing a payment than taking court action.

But make sure you use a reliable and reputable debt firm which will chase payments in a professional way – and also check how much you will have to pay, as agencies can potentially take a hefty sum in commission.

Did you know you can access your Experian business credit report on a simple pay as you go basis?

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The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.