Payment terms, and what to do when nobody pays

Make sure the invoice is right

The commonest reason an invoice sits unpaid isn't reluctance. It's that it got stuck somewhere: with the wrong person, without a purchase order number, or with a description the accounts team can't place.

With larger customers, ask up front how their payables work. Which address, which reference, and who has to approve it. That one phone call prevents more arrears than any reminder. What else belongs on the document is on GOV.UK under what an invoice must include — and most of it you already put in the quote.

What you're entitled to when payment is late

Once the term has passed you're owed three things under the Late Payment of Commercial Debts (Interest) Act. This isn't a negotiation — it's in the legislation.

• Statutory interest for the period the debt was unpaid. For business-to-business transactions that's 8% plus the Bank of England base rate, so it moves with the base rate rather than being a fixed figure.
• Fixed sum compensation, without having to show you incurred any cost: £40 for a debt up to £999.99, £70 from £1,000 to £9,999.99, and £100 from £10,000 up.
• Reasonable costs you actually incur in trying to recover the debt, on top of that fixed sum.

Two practical notes. Interest runs from the day after the payment was due, and you can choose to charge it or not — plenty of suppliers mention the entitlement and then waive it as a gesture, which is a perfectly good use of it. And say so in advance: put on your invoice that you charge statutory interest on overdue accounts, or state it in your first reminder. Claiming interest afterwards when you never mentioned it rarely goes well.

A sequence that keeps the relationship intact

This is the heart of it: the first steps aren't debt collection, they're service. Go legal straight away and you lose a customer over an invoice that had usually simply been overlooked.

1. Day 1 after the due date: ring, don't email. Friendly and factual: "I can see invoice 2026-114 is still outstanding — is there something not right with it?" Half the time there's a practical reason and it's sorted within a week.
2. Day 7: written reminder. With the invoice number, the amount, a new date, and notice that you'll charge statutory interest and compensation after it.
3. Day 14: a final reminder with a hard date. This is where the tone changes. Name a specific date and what happens after it.
4. After that: formal recovery. For an undisputed debt you can make a court claim for money through the County Court — what used to be called the small claims court — and the fee scales with the amount you're claiming. A debt recovery firm takes a share of what it collects instead. Either way, you'll need your written steps as evidence.

If it's a much bigger customer

There's a route here that doesn't exist in most countries, and small suppliers consistently forget it. The Small Business Commissioner is an independent public body set up under the Enterprise Act 2016 specifically to deal with late payment and unfair payment practices in the private sector. A small business can bring an unresolved dispute with a larger customer to its enquiry service, and the site has an interest calculator that works out what you're owed.

It isn't a court and it can't force payment. What it can do is make the dispute visible to a company that cares about its reputation and its reporting obligations — which, for a late payer with a procurement department, is often the thing that moves.

Record it against the customer

Every reminder, every call and every promise belongs in the record. Three lines each time, with the date.

You need that for two reasons. Practically: if it comes to a claim, you have to be able to show what you did and when. And commercially: after a year you can see which customers are habitually late, and that's information that belongs in your next quote — as a shorter term, or as payment up front.

Prevention is mostly agreement

Three things that make the most difference, and you sort all three in the quote rather than afterwards.

Say when you invoice. On completion, in stages, or up front. A customer who knows that in advance has arranged their cash flow around it.

Ask for a deposit on larger jobs. Thirty per cent at the start is normal in many trades and removes the biggest risk.

Put your payment terms in the quote as well as on the invoice. Not only in your terms and conditions — nobody reads those. What else belongs in there is in the piece on writing a quote.

This is an explanation, not legal advice

If it's a large amount, a customer who looks like going under, or a dispute about the work itself, take it to a solicitor. The figures and periods above are the main rules as they stand on GOV.UK; there are exceptions that vary case by case, and the interest rate moves with the base rate.