How to Handle a Late Invoice Payment
Late payments can happen to anyone — electricians, small business owners, or freelancers. But when it becomes routine, it can seriously disrupt cash flow and morale. Chasing unpaid invoices is frustrating and time-consuming, yet how you handle the situation can make all the difference between resolving it quickly and losing a client altogether.
This guide explains how to manage late payments professionally, what your legal rights are, and practical steps to reduce the chances of it happening again.
Start with a Clear and Professional Invoice
The best defence against late payment begins before the work even starts — with a properly structured invoice. Every invoice you issue should be accurate, detailed, and consistent.
A good invoice includes:
- A unique invoice number
- The date issued
- Your business name, address, and contact details
- The customer’s name and address
- A clear description of the work
- The date of service or delivery
- The total amount due, including VAT if applicable
- The payment due date
- Your bank details or accepted payment methods
If you’re a limited company, make sure your business name matches the one on your certificate of incorporation.
Taking time to prepare this properly not only prevents disputes but also shows professionalism. The Law – Lesson 17 module from Elec Training reinforces how clear documentation and compliance protect both parties — something that applies to financial processes as much as site safety.
When Is a Payment Officially Late?
A payment becomes “late” once the agreed credit period has passed.
- If you’ve agreed a payment date: It’s considered overdue the day after that date.
- If you haven’t agreed a date: Under UK law, payment is late 30 days after you issue the invoice or provide the service — whichever is later.
Always specify the due date on the invoice itself. If the project is large, consider adding a payment schedule or staged milestones to your contract.
The PPE – Lesson 3 resource underlines the importance of preparation and foresight — principles that apply equally to financial planning and contract terms.
Your Right to Charge Interest
Under the Late Payment of Commercial Debts (Interest) Act 1998, you can legally charge interest on overdue invoices. The statutory rate is 8% above the Bank of England base rate, plus a fixed compensation fee depending on the invoice value.
You can apply these charges automatically, provided your payment terms clearly state that you reserve the right to do so. Including this clause in your contract or invoice often encourages clients to pay faster without you needing to enforce it.
If a payment remains outstanding, calculate the interest owed and issue a revised invoice reflecting the new total.
Step 1: Contact the Customer
If the due date passes without payment, your first move should always be direct contact. Stay polite but firm — misunderstandings happen, and many late payments are down to simple oversight.
Send a written reminder (email or letter) that includes:
- The invoice number and amount due
- The original payment deadline
- A clear statement that payment is now overdue
- A new deadline for payment (e.g., within 7 days)
Keep a record of every communication in case the situation escalates.
If they agree to a new payment date, ensure it’s confirmed in writing. The Law – Lesson 18 module explains why written agreements are legally stronger than verbal ones — a reminder to keep your paper trail intact.
Step 2: When Talking Isn’t Enough
If the customer still doesn’t pay, it’s time to formalise your approach.
Send a Letter of Intent
A letter of intent is a formal notice stating that unless payment is received by a set date, you will take further action. It shows you’re serious and often prompts settlement before legal escalation.
Consider Mediation
Mediation can help resolve disputes without going to court. It involves a neutral third party and is usually faster and cheaper than formal proceedings.
Make a Claim
If neither communication nor mediation works, you can file a claim through the Money Claim Online service at GOV.UK for debts up to £100,000.
Court fees vary depending on the amount owed — for example:
- £60 for claims between £500.01 and £1,000
- £410 for claims between £5,000.01 and £10,000
Once the claim is filed, the debtor will receive a notice and has a set time to respond. They can pay, dispute, or counterclaim. If they don’t reply, you can request a County Court Judgment (CCJ) to enforce payment.
Step 3: Preventing Late Payments in the Future
Once the situation is resolved, take time to review what happened. Could your process be clearer or faster? Preventing late payment is always easier than recovering it.
Here are five practical tips:
- Request partial payment upfront for large jobs.
- List payment deadlines clearly on all invoices and quotes.
- State your payment terms — including late fees — in writing and make sure customers receive them before work starts.
- Send invoices promptly at job completion to set the right example.
- Use digital invoicing tools that send automatic reminders and track overdue payments.
The PPE – Lesson 5 unit highlights why having the right tools and systems in place makes professional work more efficient and consistent — the same principle applies to financial management.
Late payments are part of running a business, but they don’t have to become a constant struggle. The key is professionalism — accurate invoices, clear terms, and confident communication.
By handling late payments calmly and consistently, you protect not just your income but your reputation.
For more practical business and compliance advice for electricians and training professionals, explore Elec Training’s full library of learning resources at
https://elec.training/.
FAQs
When is an invoice legally considered late in the UK?
In the UK, an invoice is legally considered late if payment is not received by the agreed due date specified in the contract or terms. If no terms are stated, it defaults to 30 days for public sector or 60 days for business-to-business under the Late Payment of Commercial Debts (Interest) Act 1998. New 2025 reforms aim to cap terms at 60 days (reducing to 45 after five years) and introduce a 30-day verification period to tackle late payments. For consumers, reasonable time applies, often 30 days.
What details should every professional invoice include?
Every professional invoice in the UK should include a unique invoice number, your business name/address/contact details, customer’s name/address, issue date, payment due date, description of goods/services (with quantities/prices), subtotal, VAT (if applicable) with rate and amount, total due, payment terms/methods, and company registration/VAT number if relevant. For VAT-registered businesses, include your VAT number and breakdown.
Can I charge interest or fees for late payments?
Yes, under the Late Payment of Commercial Debts (Interest) Act 1998, you can charge statutory interest (8% above Bank of England base rate) on overdue business invoices, plus a fixed compensation fee (£40-£100 depending on invoice amount). For consumers, interest must be specified in terms; otherwise, it’s discretionary but reasonable.
How do I calculate statutory interest on an overdue invoice?
Calculate statutory interest by adding 8% to the current Bank of England base rate (e.g., base 5% + 8% = 13%), then apply this annual rate daily (divide by 365) to the overdue amount from the day after due date until paid. Formula: (Debt × Interest Rate × Days Late) / 365. Add fixed compensation (£40 for <£1,000, £70 for £1,000-£10,000, £100 for >£10,000).
What’s the best way to remind a client about an unpaid invoice?
The best way is to send polite, escalating reminders: start with a friendly email 7-14 days after due date, follow with firmer ones every 7-10 days (up to 3), then a final notice/letter before action. Include invoice details, polite language, and payment instructions; use templates for consistency.
What should I include in a formal “letter of intent” for late payment?
A formal letter of intent (or letter before action) should include your details, client’s details, invoice reference/number/amount/date, due date, total overdue (including interest/fees), demand for payment within 7-14 days, and notice of legal action if unpaid. Send via recorded delivery for proof.
When should I consider using mediation or legal action?
Consider mediation after reminders fail but before court—it’s cheaper/faster, often resolving in days via services like CEDR. Proceed to legal action (e.g., small claims) if mediation fails or debt >£10,000, after a letter before action.
How does the Money Claim Online process work for unpaid invoices?
Money Claim Online (MCOL) is an online service for claims up to £100,000: register on GOV.UK, submit claim details/invoice evidence/amount, pay fee (£35-£10,000 based on value), serve defendant (court sends or you do), wait for response (14-28 days), and if undefended, get judgment. If defended, possible mediation or hearing. It’s user-friendly for small businesses.
What steps can I take to prevent late payments in future projects?
Prevent late payments by setting clear terms (e.g., 30 days net), conducting credit checks, requiring deposits/upfront payments, sending timely reminders, offering early payment incentives, using automated invoicing, and building strong client relationships. Implement contracts with penalties.
Why is clear documentation so important when dealing with overdue payments?
Clear documentation is vital as it provides evidence for disputes/legal action (e.g., invoices, contracts, reminders), tracks interactions to avoid misunderstandings, supports interest/fee claims, and ensures compliance with laws like the Late Payment Act. It protects your business and speeds recovery.
