Get paid faster: a practical plan for tackling late payments

Late payment is one of those problems that rarely arrives on its own.

An invoice goes overdue, then your cash flow tightens, then decisions get harder – can you cover wages, VAT, stock, rent or your own salary?

Even a single late payment can put pressure on the whole business and on you personally.

Emma Jones CBE, the Small Business Commissioner, puts it plainly in her interview with Grow London Local: late payment doesn't just affect the numbers – it can affect founders' wellbeing and hit their ability to pay themselves and their staff.

This guide explains why late payments happen, what your rights are and what to put in place so you spend less time chasing and more time running the business.

1. What "late payment" actually means (and why it matters)

At its simplest, a payment is late when it's not made by the date you agreed.

If you didn't agree a payment date, the law treats payment as late 30 days after the customer receives your invoice, or after you deliver the goods/provide the service – whichever is later.

Why it matters is obvious when you look at what late payment does to a small business day-to-day:

• You become the bank for someone else's business.

• You make conservative choices (delaying hiring, marketing or buying equipment or stock).

• You burn time on admin you didn't plan for – often at the worst possible moment.

2. Why late payments happen – the common causes

Most late payments fall into one of three "buckets".

• Ability – they don't have the cash (or they're juggling priorities): some customers are disorganised or genuinely struggling. Others have cash, but they're choosing to pay you last.

• Process – their systems slow things down: this is common in larger organisations. In Emma Jones' interview, she says some non-payment comes down to simple issues – process changes, miscommunication, invoices going to the wrong place – rather than an outright refusal to pay.

• Behaviour – poor payment culture: where late payment becomes normal, invoices drift. The buyer doesn't feel any urgency because the consequences land on you, not them.

Your job is to remove "process" excuses, spot "ability" risks early and set clear consequences for "behaviour".

3. Your legal rights in plain English

You don't need to be aggressive to be firm. Knowing the rules helps you speak with confidence.

Statutory interest (the legal interest you can add)

If another business is late paying for goods or services, you can usually charge statutory interest at 8% plus the Bank of England base rate.

But there are two important nuances:

• If your contract includes a different interest rate, you generally can't also claim statutory interest.

• Where public authorities are involved, the rules differ (and you can't contract for a lower rate).

Fixed compensation (a set fee for the inconvenience)

On top of interest, you can charge a fixed sum for every late invoice:

• Up to £999.99 = £40

• £1,000 to £9,999.99 = £70

• £10,000 or more = £100

Payment terms: what's "normal"

If you agree a payment date, it should usually be within 60 days for business-to-business (B2B) transactions (and 30 days for public authorities), unless a longer period is fair to both sides.

If you want a quick way to calculate what interest/compensation could look like on an overdue invoice, the Small Business Commissioner's website includes an interest calculator and guidance.

4. Setting clear payment terms

A surprising amount of late payment comes from vague terms. Your aim is to make the "rules of payment" boringly clear before any work starts.

Include these basics in your proposal, contract or statement of work:

• Your due date (for example, "14 days from invoice date" or "due on receipt").

• What triggers invoicing (booking confirmed, milestone reached, delivery, sign-off).

• How payment should be made (bank transfer details; card link if you take cards).

• What happens if payment is late (interest/fees; work paused; no further work delivered).

• Who inside the customer's organisation signs off invoices (a named contact if possible).

If you only do one thing this month: add a line that says work pauses if invoices go overdue, and mean it. It's far easier to enforce boundaries before you're resentful.

5. Invoicing best practice (remove the easy excuses)

Small Business Commissioner Emma Jones makes a point that's worth repeating.

Some late payments happen because the small business got the invoicing wrong – wrong person, wrong email address, missing information – and the invoice simply falls out of the system.

A "get paid faster" invoice is usually:

• Sent immediately (the same day the work is delivered or milestone achieved).

• Accurate and complete (purchase order number, correct company name, VAT details, line items).

• Easy to approve (short, clear descriptions; no surprises when put against the quote).

• Easy to pay (bank details prominent; optional payment link; clear reference).

A simple internal rule helps: no invoice leaves the building without a two-minute check.

If you work with bigger organisations, ask upfront what their accounts payable team needs:

• Do they need a purchase order before you start?

• Do they have a form for new suppliers to fill in?

• Is there a portal you must upload invoices to?

• What email address actually reaches the accounts payable team?

6. Communication strategies that get results

Don't let emotions take hold when you're chasing payment. Treat the process as routine and always be polite, but be consistent and keep a written record of everything.

A practical sequence for chasing late payments

• Before due date (3–5 days prior): a friendly nudge, which might read "Just sharing the invoice again for ease – due on [date]. Let me know if anything needs amending for approval."

• Day 1 overdue: assume first that there's been an issue with the process. "Invoice is now overdue – can you confirm it's in the queue for payment and the date you expect to pay?"

• Day 7 overdue: be more specific and ask a yes/no question: "Please confirm you'll make payment by [date]. If you have a query, please share it today so we can resolve it."

• Day 14 overdue: introduce consequences calmly: "As per our terms, we'll need to pause further work until the account is up to date. We might apply statutory interest."

• Day 21+ overdue: final notice and escalation: "If we don't receive payment by [date], we'll begin formal steps for recovery."

Two tips that sound small but make a difference:

• Always include the invoice PDF again. Don't assume they'll find it.

• Keep the thread alive. Reply to the same email chain so there's a visible history.

If you're worried about sounding confrontational, write as if you're speaking to a peer you respect – direct, factual and unflustered.

7. Ways to avoid being paid late

Preventing late payment is a mix of screening, structuring and simple pricing choices.

Screening: know who you're dealing with

• For larger projects, consider a light-touch credit check or trade references.

• Ask other suppliers discreetly: "How are they for paying on time?"

Structuring: don't fund the whole project yourself

• Deposit upfront (common for creative, professional services and build-related work).

• Staged payments tied to milestones (so exposure stays controlled).

• Shorter deliverable cycles (invoice little-and-often rather than one big bill).

Pricing choices that protect you

If late payment is a known risk in your sector, you can price for it (quietly) by:

• Offering a small discount for early payment.

• Charging more for longer payment terms.

8. When to escalate (and where to get help)

Escalation is worth considering when you've followed your usual chase process and you still don't have either the money in your account or a firm payment date confirmed in writing.

In practice, that's often when:

• An invoice is a couple of weeks overdue.

• Your messages are being ignored.

• You're getting vague non-answers ("it's with finance", "next week") rather than a specific date.

It's sensible to escalate sooner if:

• The amount is significant for your cash flow.

• You suspect the customer is under financial pressure.

• You're being asked to keep delivering work while earlier invoices remain unpaid.

Here's a simple rule of thumb.

If you've set one clear deadline and they miss it – or you've chased several times with no real progress – move it up a level and make your next steps clear (for example, pausing work and using the formal rights and support available).

Using interest and compensation deliberately

You don't have to apply statutory interest on every late invoice, but it can be useful as a signal that payment terms are real.

GOV.UK sets out both the basis for statutory interest and the fixed compensation amounts you can claim.

Consider the Small Business Commissioner (SBC)

In our interview, Emma Jones explains that the SBC is there to help small firms get paid promptly, and that the service is impartial and free.

If you're a business with fewer than 50 employees and have a payment issue with a private sector business with more than 50 employees, you could be eligible for help.

If you want a starting point, the SBC website has practical guidance (including the interest calculator) that can help you understand your options and approach conversations more confidently.

9. Quick read: key takeaways from Emma Jones' interview

If you only have a few minutes, Grow London Local's conversation with Emma Jones is useful for two reasons:

1. It frames late payment as a system-related problem and not a personal failing. And it acknowledges the emotional and practical strain it puts on founders.

2. It underlines a very practical point – before you escalate, check for the simple stuff and reach out to your direct contact first.

You can read the full interview on Grow London Local.

A simple rule going forward

Treat your payment system like any other operational system: set it up clearly, make it easy to keep to and follow a consistent process when it slips.

The late payment issue won't disappear overnight. But with tighter terms, cleaner invoicing and calmer follow-up, you can reduce how often it happens – and how much it disrupts your week.

Read more

• Free late payments support (Small Business Commissioner)

• Free late payments resources and advice (Small Business Commissioner)

• Invoicing for SMEs

• How to get paid on time and successfully tackle late payments

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