Step 1: Establish why
Call the customer. Most late payments are administrative — wrong PO, missing reference, contact on holiday. A two-minute call resolves 80% of them.
Step 2: Confirm in writing
Email a recap of the call: agreed payment date, amount, reference. This becomes evidence later.
Step 3: Apply statutory interest
Once an invoice is more than 30 days late (or past your agreed terms) you can charge under the Late Payment of Commercial Debts (Interest) Act 1998:
- Interest at 8% + Bank of England base rate
- A fixed sum: £40 (debt under £1k), £70 (£1k–£10k), £100 (over £10k)
- Reasonable recovery costs
Add a new invoice line and reissue.
Step 4: Formal letter before action
If still unpaid after 14 days from the reminder, send a Letter Before Action — a formal written warning that legal proceedings will follow. Templates are on GOV.UK.
Step 5: Escalate
Options in order of cost:
- **HMRC Pay & File ** — only if the debtor is in liquidation
- Money Claim Online for sums under £100,000 (court fee from £35)
- Statutory demand for sums over £750 — threatens winding-up; powerful but legally risky if disputed
- Debt collection agency — typically 8–15% of the recovered amount, no-win no-fee
- Litigation solicitor — for complex or high-value disputes
Never escalate while the customer is mid-payment. Always pause if there's a credible dispute about the work itself.