How to Chase an Unpaid Invoice
Sam Griffin
Most businesses will face an unpaid invoice at some point. The problem is rarely one invoice in isolation. It is the cash flow gap it creates while you wait to be paid that does the real damage. A clear, consistent process for chasing late payment means less time chasing, faster resolution, and a better chance of getting paid without damaging the commercial relationship.
Before you start chasing
Before sending any communication, check a few things. Confirm that the invoice was actually sent, that it went to the right contact, and that the payment terms on the invoice match what was agreed. Late payment is sometimes a result of the invoice going to the wrong email address, landing in a spam filter, or containing an error that gave the client a reason to delay processing it.
Also check your contract or terms of business. Your payment terms, the agreed due date, and any late payment provisions you included should all be clear before you engage. If you do not have written terms, note that for next time. The absence of documented terms does not prevent you from chasing payment, but it does weaken your position if the matter escalates.
The initial reminder
Send a polite payment reminder as soon as an invoice becomes overdue. Many businesses leave a buffer of a week or two before chasing, which simply trains clients to pay late. On the due date, or one to two days after, send a short email confirming the invoice reference, the amount outstanding, and the payment details. Keep it factual and professional. Most late payments at this stage are genuine oversights and resolve quickly.
If you receive no response within five working days, follow up with a phone call to the accounts payable contact or finance team. Email is easy to ignore. A call is harder to. Note the date, time, and what was said. If you are told the payment is being processed, confirm a specific expected payment date and follow that up in writing.
The formal demand
If the invoice is still unpaid after two rounds of chasing, escalate to a formal written demand. This should be sent by email and ideally also by recorded post. It should state the original invoice date, the amount outstanding, the payment terms that were agreed, and a firm deadline (typically seven to fourteen working days) after which you will take further action.
The tone shifts here from reminder to notice. You are documenting that you have made reasonable attempts to recover the payment and that the client has not responded. This matters if the matter eventually reaches a court or debt recovery agency.
Your statutory rights under the Late Payment Act
Business-to-business transactions in the UK are covered by the Late Payment of Commercial Debts (Interest) Act 1998. This gives you the right to charge statutory interest on overdue invoices and to recover a fixed sum to cover your debt recovery costs, without needing to include these provisions in your contract.
Statutory interest accrues at 8% above the Bank of England base rate. With the base rate currently at 3.75%, that is 11.75% per annum on the outstanding balance, calculated from the day after the payment due date. The interest compounds daily.
You are also entitled to a fixed compensation amount for the cost of recovery, which you can add to the amount you are claiming:
£40 for debts under £1,000
£70 for debts between £1,000 and £9,999.99
£100 for debts of £10,000 or above
If your reasonable recovery costs exceed the fixed fee, you can claim the higher amount instead. These rights apply automatically. You do not need to have included them in your original contract for them to be enforceable.
When you send a formal demand, include the statutory interest calculation and the applicable fixed fee. It demonstrates that you know your rights and makes clear the total cost of continued non-payment to the client.
Payment plans
If a client acknowledges the debt but says they cannot pay in full immediately, consider whether a payment plan is the right approach. For a long-standing client with a genuine cash flow problem, a structured payment plan can recover more than aggressive escalation and preserve the relationship.
If you agree a plan, get it in writing. Specify the amounts, the dates, and what happens if a payment is missed. A plan that is not documented is no more enforceable than a verbal agreement.
When to escalate
If the formal demand produces no payment and no meaningful response, your options are small claims court, county court, or a debt collection agency.
Small claims court handles debts up to £10,000 in England and Wales. The process can be started online through the government's Money Claim Online service and does not require a solicitor for straightforward cases. Filing fees range from £35 to £455 depending on the amount. If the claim is uncontested, you will typically receive a judgment within a few weeks, which gives you the right to enforce payment.
Debt collection agencies take over the recovery process in exchange for a percentage of what is collected, typically 10% to 25%. For smaller debts or clients who have simply gone unresponsive, this removes the time cost from your side. The downside is the commercial relationship is effectively ended.
The cash flow impact
The most damaging aspect of unpaid invoices is not the individual debt. It is the sustained gap between the work being done and the money arriving. Businesses with a significant proportion of credit-term invoicing can find themselves profitable on paper but regularly short of cash.
For businesses where late payment is a recurring issue rather than an occasional one, invoice finance addresses the underlying problem rather than the individual invoice. Instead of waiting sixty or ninety days to be paid, you receive a proportion of the invoice value upfront from a finance provider, with the balance (minus fees) arriving when the client pays. For businesses in sectors where extended payment terms are standard, this can make a material difference to how cash flows through the business. For more on how the product works, see our guide to invoice finance for small businesses.
Frequently asked questions
How long should I wait before chasing an overdue invoice?
Send an initial reminder on or shortly after the payment due date, not a week or two later. Leaving a buffer trains clients to pay late and delays the process unnecessarily. For most businesses, a reminder on the due date followed by a call within five working days is the right rhythm.
Can I charge interest on a late business invoice?
Yes. Business-to-business invoices are covered by the Late Payment of Commercial Debts (Interest) Act 1998, which gives you the right to charge 8% above the Bank of England base rate on overdue balances. You do not need to have included this in your contract for it to apply. You can also recover a fixed debt recovery fee of £40, £70, or £100 depending on the size of the debt.
What if the client disputes the invoice?
A genuine dispute should be resolved before escalating. Ask for the specific objection in writing, address it, and reissue a corrected invoice if needed. If the client is using a dispute as a delaying tactic rather than raising a substantive issue, document that distinction clearly. A client who cannot specify what is disputed is not genuinely disputing the invoice.
Does chasing payment damage the client relationship?
Chasing what you are owed professionally and promptly does not damage most commercial relationships. Unpaid invoices left unaddressed for weeks or months before any contact is made are more likely to become awkward. Clear, consistent payment terms and prompt, businesslike chasing set expectations and are generally respected by clients who intend to pay.
When should I write off an unpaid invoice?
Writing off a debt is a last resort. Before doing so, consider whether the client has assets that could be pursued through enforcement (including against a judgment), whether the debt recovery cost justifies the amount owed, and whether the client is likely to trade again with you. For smaller debts where the cost of recovery exceeds the amount, writing off and adjusting your terms for that client going forward is sometimes the more pragmatic call.
This article is for informational purposes only and does not constitute financial advice. Always seek independent advice before making financial decisions.
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