Late Payments - What can you do and what are your rights?
It’s the moment we dread – that big invoice we needed to be paid on time hasn’t been paid
and now we are panicking as there are bills that we need to pay, and we don’t want to be
that business who pays our suppliers / freelancers late because we were paid late.
There’s obviously something in the above about hand-to-mouth existence and I’ll pop some
links to some other blog posts at the end that you might find handy to read too.
But, not getting paid on time is a pain in the backside that we don’t need regardless of
whether we are hand-to-mouth or have cash in the bank. But going in heavy handed straight
away quoting your legal rights isn’t necessarily the right approach as you don’t want to ruin
any business relationships in the process.
1 – Polite reminder
I have clients who send a reminder that an invoice is due a couple of days before the
payment date, they send a nice polite email to say:
"Hi – I am sure it’s all in hand but just a reminder that our invoice is due for payment on … a
copy is attached for your reference, if you had any questions or queries then please hit reply
and let me know."
Sending pre-payment reminders might not be your thing. But if the invoice isn’t paid on time
then on the next day send a polite email to say:
"Hi – Our invoice was due for payment yesterday (or state the date), please can you let me
know within the next 2 days when payment will be made so I can make a note on our
system. A copy of the invoice is attached for your reference. We value your custom, but
would like to remind you that our terms are .. days and as a small business being paid on
time is important to us."
2 – Follow up
If you haven’t had a reply within the 2 days (or however many you have given) send a follow
up, more formal email:
"Hi – I am following up on my email of (date) requesting confirmation of payment of invoice
number … dated … and due for payment on date … This invoice is now … days overdue
and if we do need hear from you within the next 7 days we will look to take legal steps to
recover the monies owed."
3 – Don’t chicken out!
If you have said you will look to take legal steps – then do it! Otherwise you are basically
doing the business equivalent of telling a toddler you are counting to three (does anyone
ever get to three? What happens at three?!).
There are two options:
Letter before legal action – this is still a legal letter but states that if payment is not made within 7 days court action will be taken to recover the debt.
Late Payment demand – this will detail the compensation and interest that is due on the late payment. The law allows you to charge 8% above base rate on the debt for the number of days that it is overdue and charge compensation which is dependent on the size of the debt.
If these don’t result in payment then it’s a case of taking them to court, again you can do this
yourself or you can appoint a solicitor to do this for you.
Resources to help:
There are varying resources on-line to help you with this process:
As I said at the start .. a hand-to-mouth existence within your business suggests that there
are other areas you ought to be looking at and here are a couple of blog posts you might
want to read to help you:
Learning to plan for a rainy day: https://simplified-accounting.co.uk/blog/learning-to-plan-for-
Finding cash within your business: https://simplified-accounting.co.uk/blog/finding-cash
And there are lots and lots of posts on pricing too!