If you run a small business or know someone who does, you have probably dealt with or heard about a payment being late.

This is especially true for B2B businesses.

But is there anything that can be done about this nuisance?

As it turns out, there are several steps your business can take to prevent and report unpaid invoices that are long past their due date.

Sure, these steps will take some time to develop and implement.

But if they save all the frustration that becomes inevitable with late or no payments, aren’t they worth it?

We certainly think so.

That is why we went ahead and created this handy little guide to help business owners tackle the ever present issue of late payments.

It is such an ordeal to manage cash flows and at the same time to protect your business from late payments.

A one time late payment can just be a minor hiccup but letting your customers continue this practice is devastating for your business.

You’ll be short of funds for your supplier payments and start missing due dates.

That is a whole new front full of frustrations for you to tackle.

Late payment of commercial debts won’t let you pay your utility bills, rents, taxes, mandatory operating costs and employees’ salaries on time.

Are late payments just a reality of doing business?

Do you run a small or medium-sized business or think about starting up a new one?

For the new business, almost no one takes the time to think about the late payment strategy. Instead, you dedicate the whole time towards beating the competition, arranging financial sources, and seeking out suppliers for the products to offer.

Careful planning elsewhere does not protect your business from late payments. Within a few months, it is quite possible that you could be chasing thousands of pounds in late payments.

By that time, you’ll realize that your cash flow is not sufficient enough to support the operating cost of running your new business. This same trend leads to business failure and we hate to say it, but that’s the reality of it.

The ones who are already running SMEs and selling on credit exactly know what that means. They try their best to tame late payments so that they won’t lose their mental health over it.

Cash flow issues

Cash flow is the oxygen for your business. Without it, you’ve carefully thought-out plans to sustain or to grow it can go down the drain. Late payment is never a win-win situation as it seriously impacts your cash flows.

Many businesses spend 10% to 15%  of their working time daily to chase payments from the same customers that they were so happy to start a business with.

Expect to add another 10-15% of your weekly working time tending and making excuses to your own suppliers who are asking for their due payment. You can’t pay them because you’re still waiting for payments from your customers.

Why late payments occur and what to do about it

Excuses, excuses, excuses. Some are valid ones and others are just to buy more time. Some customers are habitual late payers.

Well, don’t let their habit become a disaster for your business.

Let’s go through a variety of excuses that your customers can up with before and after the due date and ways to counter them.

To follow or not to follow the herd

A few industries such as construction and manufacturing are accustomed to late payments.

These industries mostly depend on their sales, overheads and customer payment cycles.

Due to this, your business might suffer because of a client’s credit practices.

Let’s say your company, A, supplies products or services to company B. Company B is dependent on Company C’s payment to pay invoices for Company A.
Now if company C for some reason pays late to company B, Company B cannot pay Company A within the due date. This affects your business if you are a smaller enterprise than company B and C.

Company A, supplies products or services to Company B

Thus, resulting in you allocating more resources to chase payments while disrupting cash flow at the same time.

Sometimes, your service or product is not critical enough for the customer’s business operation.

That is the reason you may not end up on their priority list for early payments.

They can use delaying tactics to hold up the payment as long as possible to pay other suppliers or service providers first whose services they need more than yours.

To manoeuvre around this hurdle, you must have a clear and strong business credit policy about late payments.

If you follow the same poor practices that these industries do, you’ll suffer more than them, especially if you are a small business. You can offer instalment plans to your customers if they find themselves on the giving end of late payments.

Take strict actions from the start. Your customers must know frequently that your on-time payment is as important for your business as it is for theirs to survive.

It can be a fact that your business is part of a longer supply chain. In this case, contact your customer directly and make it clear that your payments should not be held up by their late payments further down the chain.

You can also ask the customer’s criteria for chasing payments so that you can plan payment recovery steadfastly.

Clients who show signs of financial weakness

It is possible that your customer’s business is in turmoil and they can’t pay you back.

This demands the highest priority as far as your business’s financials are concerned. It’s a grave risk and addressing it on time is the difference between failure and success.

You should do your due diligence and inquire about the credit ratings of your customer to know if they have any impending financial troubles. Limiting credit lines or shifting to pre-pay is the next best thing to do.

Also, make every effort to get the payment earlier than the other suppliers waiting in line for payment from your customer. Hoping to get payment in the near future is a gamble and a gamble can be a hit or a miss. You may end up writing off the debt to remove it from your account receivables.

Client’s in-house accounts not in order

Another possibility is that your customer’s internal invoicing system is a mess and they don’t chase payments according to standards to pay you in time. This can be due to the customer’s business workload. This can also be true for startup businesses with less headcount to chase their own payments.

There are many excuses that come up from your customer if they can’t manage fast invoice processing.

1)      If you ever encounter an “Accounts too busy” scenario, you should be able to contact the person directly responsible for your payments in their account’s department. System busy and account busy errors force unusual delays. You can further check that your invoices have been viewed by your employer by using cloud accounting software. This will let you confront your customer that you are on top of your game and follow post-invoicing procedures rigorously.

2)      Another common excuse is that the account manager comes in once per week or in a fortnight. In this case, make sure you know the exact day the manager is coming in. Contact him/her and inquire about your invoice. If you miss that day, you are looking at another 7 to 14 days of waiting time. Implementing a BACS with a direct debit system also remedy this excuse as well as the customer’s excuse of waiting for a new cheque book.

3)      Switching bank accounts is an inconvenient and highly undesirable task and companies avoid doing so. If this is the reason for your late payment, inquire about the final date of transferring accounts to sort out your due payment afterwards.

4)      Invoice not received or lost is a very common delaying tactic and is a cause of serious concern. Invoice through email with a follow-up call usually robs your customer of this reason.

5)      Handling the excuse that the person who deals with payment has left the business, or has passed away should be done in a polite way. Contact the customer’s account department and get a hold of the person who manages the payment responsibilities currently. Although, it is recommended to offer condolences while acting softly if the person who used to be responsible has indeed passed away.

6)    A systems down is an annoying excuse. Shift to manual methods (Invoice by letter, or a call) to chase payments.

Customers who pay late for the success of their own business

Let’s suppose you are running a successful business. The customer service is top-notch and your product or service is in high demand.

Also, the customers are repeat buyers and even recommend your services to others.

But if they fail to pay for your services and products on time, deliberately or not, you’re basically helping and growing their businesses and failing your own.

Being tolerant at the expense of your own business does not land you anywhere.

If you have relaxed receivables policies, your customer knows it and will try to delay payments as much as possible. They’ll treat this late payment as free cash for higher working capitals for their own company.

Therefore, take a look again at your current credit policies and make it clear in bold letters the repercussions of late payment. Let your customers know that you are willing to chase payments using informal to legal means because your own business is at stake.

This will raise an alarm to the customer and could get them to adjust their paying habits.

Best practices to protect your business from late payments

Here are some things you can do to improve your business credit practices.

Contract or agreement

Doing business with a new client on the basis of informal agreement can be tricky. Your client can end the business terms upon failure of payment without any legal repercussions.

A contract on the other hand contains clauses and terms about late payment and other mandatory aspects. A contract is enforceable by a court as both parties agree to the terms when signing to avoid future complications and invoice disputes.

Implement aging method and customer rating system

Accounts Receivable Aging

An ageing data lists customer’s unpaid/late invoices by date into four or more columns. It greatly helps with keeping track and chasing payments according to the preference in the table.

  • Column 1 lists undue invoice amounts
  • Column 2 lists 1 to 30 days invoices that are past the due date
  • Column 3 lists 31 to 60 days past due date invoices
  • Column 4 lists more than 60 days past due date invoice amounts

You can also rate customers on the basis of timely payments for effective monitoring.

  • Assign A for those customers who always pay the invoice before the due date.
  • Assign B for customers who usually pay invoice around the due date and require minimal payment chasing.
  • Assign C for clients who regularly cross the due date barrier but pay after credit line adjustments.
  • Assign D for customers who need prompt chasing and monitoring. The resources you use to recover payment add to overhead costs.
  • Assign E to those debtors whom you like to offer services or products with advance payment terms and zero credit.

Improve your in-house invoicing practices by signing up for autopay

It is beneficial to start the invoicing process upon the delivery of goods or services.

Some businesses send batch invoices on a particular day of the week. That adds up to 5 days to the recovery cycle without any purpose.

It can be harmful to the cash flow because you will be adding days unnecessarily.

Although you’ll get the payment for it, the process of getting your payment back starts after the invoice. So, if you are 15 days late for invoicing, it’s 15 days more to get the payment.

Prominently feature terms and due date on the invoice

Do not leave any margin of error when mentioning the due date and terms related to it. Speak to the accounting department about the terms and implications if the customer is habitually paying late.

Use electronic invoicing systems

Invoices through email are not only cost-effective but also cut down stationary costs as well. It further ensures on-time invoice delivery and also offers a source of documented proof.

Introduce various payment options and instalment plans

Offering only a single payment method through cheque allows customers to give excuses for late payments. Losing a cheque in the mail or having to bear the cheque clearing process can cost a little time. Make better use of today’s possibilities offered by internet banking.

Utilize credit and debit card, direct debit, bank to bank transfer and standing order payment options with modified instalment plans to manage your cash flows.

The instalment plans also make it easy for your customers to pay within the due date and to manage their own cash flows as well to avoid late payments.

Track your invoices

A lot of times, you only interact with the sales and marketing staff to get their business. It is necessary to know where your invoices end up after the services or goods delivery.

Getting to know the right person helps in tracking down your invoice and the reason for the hold-up. This will speed things up for sure.

Nurture the right relationship

Being rude or losing composure while communicating with the customer when chasing late payments does absolutely nothing good for your case. However, polite behaviour with a firm stance works most of the time.

From the start of the business to the end, if the customer is willing to pay, don’t give the impression of an escalation in matters from your side with an abusive attitude. Of course, it is your money and late payment is a curse, but a polite voice can do wonders over an angry tone. This will help you get in their good books for future communications.

Send reminders before due date

Waiting with hopes of getting the payments without reminding your customer does not work every time. If the payment is already near the due date, remind your customers by emails and/or automatic software that the due date is near.

This simple practice often saves your business loads of time and overhead costs. Be polite and attach an invoice copy with a reminder email and mention a person’s name from your office as a point of contact in case of any issue. Also, offer the customer the option to pay via your accepted payment methods for their ease.

Keep proof of goods and services

Whenever you deliver goods or perform any services, make sure you have undeniable proof that the customer has received the goods, or the services are up to the standards when completed.

Secondly, the communication emails between you and the customer are also strong proof if an issue arises on the terms when the amount is due. Keep all the records safe and secure.

Train your team

Your SME’s sales team is the backbone of the profits it makes. Training them in a way to do business with only those customers whose credit ratings, debt payments and customer service are to ensure growth for your SME.

Your team should be capable of researching first about the company or customers rather than shooting in the dark for meeting sales targets.

How to set up automatic reminders

An automatic reminder software can take the load off your office staff. Your debt collector agent can schedule to send late payment reminders when the amount is due and can reschedule those reminders with a click of a button.

Before writing off a debt, use software to remind the customers automatically that you are on a constant chase. As a result, the chances of collecting debt payment soon become favourable.

There are quite a few automatic reminders available to save you time and money. A few of them are:

itsettled.co.uk – Through their debt collection SMS payment software, you can customize payment reminders through SMS and WhatsApp for business. Utilizing two-way communication for both SMS and WhatsApp lets your customer reply to your messages as well. As most of the customers use mobile phones, frequent payment reminders will force them to reply and take matters seriously. Also, you won’t be spending your budget and time on phone calls.

chaserhq.com – Launched for the sole purpose of chasing payments easily and effectively. The software can send email reminders in a customized, polite, and professional way and can even schedule them according to the urgency. The software shows your payment methods to customers for ease of access. You can track and view the receivables along with customer responses.

zervant.com – zervant can help you with automatic email and postal reminders. You can set the frequency of reminders before and after the due date through email. There is no limit on sending those reminders but there is a limit of 10 posts per month for automatic postal reminders. Getting your reminders from both of these communication channels adds pressure to the customer to pay upon receiving the message.

freshbooks.com – With Freshbooks, you can not only send automatic email reminders but can also add late payment fees as well. You can customize a personal message and additional manual reminders along with the automated reminder.

sliqtools.co.uk – This software is intended for those who don’t know a lot about accounting but want to benefit from automatic reminders. Track your payments with minimal effort. The interface with an automatic email reminder set up is easy to use and comes with all the standard options for customization.

Automatic follow-up email reminder tools

While you are setting up automatic reminders, your business can also benefit from follow-up reminder tools through email add-ons. Most of them are cheap and serve the same purpose of chasing late payments by using less time and effort.

SalesHandy – You can email 200 customers every 3 hours. There is a 1600 emails per day limit to track late payments. The service offers a 10-stage email follow-up. You can also customize ‘not replied’, ‘has been sent’ and ‘not opened’ conditions with emails and document tracking and scheduling. It is a handy tool to chase payments frequently.

Yesware – offers almost the same features to follow up emails like SalesHandy but is a little costly. It is the oldest tool in the market to trace debt defaulters.

Boomerang– Boomerang for Gmail is another good option. It lets you take control of sending reminder emails to chase late payment robustly. If your customer doesn’t reply, an automatic follow-up email is sent.

Rebump – A simple auto follow up tool for chasing your customers after the due date with easily accessible options. As the name suggests, Rebump bumps up your reminder until you hear from your late-paying customer.

Follow up email reminders templates

Writing a great follow-up email with a late payment objective and a call to action by staying polite at the same time requires professionalism. Email chasing is a tested method for debt recovery and for credit control.

There are usually three stages of email reminders. Let’s look at an example for each of these stages.

Stage 1 – due date is near

Sitting in your office and waiting for the due date to pass before chasing a payment? Not a good idea! Instead, you can send an email to the customer reminding them that the due date is near in case he/she forgets about it or his/her own payment reminder system is down.

You can seek guidance from the following template.

Subject: [Your Company name]: invoice [invoice number]


Hello [Customer’s First Name]

I hope you are having a wonderful week.

I just wanted to send a reminder regarding your invoiced amount of [Invoice amount] in respect of our invoice [invoice number]. The invoice is due for payment on the [date due].

Paying on time helps us keep our payments in order and gives us the room to make our products and services even better for our customers.

Please let me know if there is anything I can help you with regarding the payment.

Warm Regards,

[Agent first name]

Stage 2 – invoice just passed the due date

At this stage, you can give the customer the benefit of the doubt and ask them the date by which you expect to get the payment.

Subject: [Your company name]: invoice [invoice number]


Hi [Customer’s first name]

I hope this email finds you well.

We have noticed that we did not receive payment of (Invoice amount) for the invoice ( invoice ref number) which was due on ( due date).

I would be glad if you could let me know when we can expect the payment.

If you need any assistance regarding the payment, please let me know at your earliest.

Best regards

[Agent first name]

 Stage 3 – invoice due for more than 30 days

At this stage, you have already sent many email reminders and also used automatic software along with postal and call reminders as well. It is time to give a clear message so that your customer won’t come up with another delaying excuse.

Subject: [Company name]: invoice [invoice ref number] OVERDUE


Hi [Customer’s first name]

I hope you are well.

We are still waiting for the payment of [amount on invoice] with reference to our invoice [invoice ref number] which was due on [date due]. We have made repeated attempts to get in contact with you but unfortunately, we have not heard from you regarding this debt. We hope for your serious consideration to resolving the debt amount as soon as possible.

At this time, we would like to request you to please pay the outstanding balance within the next three days. Failure to do this will result in us contacting relevant authorities and using all legal means to recover our debt.

I look forward to hearing from you.

Best regards

[agent’s first name]

Why is a late payment a breach of contract?

The law states  that the payment date should be within 60 days after the invoice date for B2B contracts (Although you can mention more than 60 days in the contract terms) and individuals and 30 days for B2C contracts.

The law also states that failing to mention payment date in the terms results in a 30 day payment term by default after invoicing. It comes into effect when you have delivered the services and goods on time and the customer has received the invoice.

Unfortunately, most of the customers see the due date as the starting date for acting on it. They’ll start working on getting the payments ready instead of settling the debt.

This adds more days to get your payment back and further puts your business in harm’s way. Whatever, not honouring the terms of a commercial contract is a breach of terms and can be adjudicated by the courts in the UK.

If you have clearly mentioned late payment terms in the contract, not paying on time is careless behaviour but also surely a breach.

The right of terminating a contract should be brought up to customers to show them your seriousness. If your customers do breach the contract, you can utilise all legal means available to you. These can involve charging interest, charging late payment fees, and even suing them in a court of law.

Make late payment unattractive with interest fees, fixed fees and debt recoveries

Whenever deadlines are missed and the customer is not willingly open to negotiating, you have the right to make a statutory demand. In this scenario, the customer has 21 days to pay the debt and to reach an agreement to pay. After 21 days, you can apply for their liquidation to make them go bankrupt.

You can also charge late payment interest if you want to choose that route. This is called statutory interest. It’s 8% plus the Bank of England base rate.

For example: If a customer owes you £1500 and the Bank of England base rate is 0.10%. The annual statutory interest would be £121.5, and the daily interest would be 33.2p. Multiply 33.2p to the number of days after the due date. You can add this amount to the invoice and send a new one.

On top of claiming interest, you can also charge your customer a fixed late payment fee. That fixed amount is directly proportional to the debt amount and can only be charged once. You can charge:

£40 for debt up to £999

£70 for debts between £1,000 to £9,999.99

£100 for £10,000 and above

How to report late payments

Late payments can be reported to the credit bureaus , and if done right, your non-paying customers will feel the heat. Anyone who wants to do business with your debtor will be cautious because on their credit score that can result from your reporting.

The process of reporting is rather simple. All you have to do is go to the relevant websites such as the Register to Report Credit Data by Experian and signup.

Mention the customer’s business name and address, total debt payment, the date when payment was due, agreement clauses regarding late payment, brief details about goods and services delivered, and the number of times and methods you used to contact the customer to resolve the issue and settle the debt.

Report late payment in the UK:


The UK Government has an official website where you can complain about late payments. If you have less than 50 employees and you are reporting a company that has more than 50 employees, you can contact them directly at the following email addresses for any complaints.

[email protected]
[email protected]


A website that issues a report on how large enterprises pay SMEs. You can get a detailed report regarding your customer’s payment behaviours.


Alllucid is a crowd community software that supports the UK government and the small business commissioner. It provides accurate reports about your customer’s late payment practices and whether or not you are the only one who is experiencing late payments.


The Register of Outstanding Invoices – ROSI, shows information for commercial debts. You can subscribe and then report your customer to ROSI for late payment and their data will be viewable to the general public.


You can rate a company that you’ve done business with. It then offers lifetime free access to their directory to check late payment records for any company you want to do business with in future.


Businesses report their payment practices here. You can make the best use of their directory to inquire about your customer’s late payment timelines.


It is a dispute website to view disputes among businesses. If your customer has a dispute in the past or current, their directory will show dispute status and how well your customer countered it. You can also open a late payment dispute here.


You can report late, overdue and unpaid invoices here to save other businesses from non paying clients. You can also search their database before getting into the new business with your customer as well.

Reporting in the USA:


A dispute website that displays chronic and occasional late payers along with uncollectible accounts. You can report your customer to add them to the list.

Reporting in Canada:


To report late payment and make it available to the public, fill in a few details about your customer along with dispute clauses, due amount, the past due date, and mention penalty fees if incurred. Email the details to [email protected]


A free service to report all unpaid invoices to Equifax and TransUnion on behalf of their clients. You can use this service for late reporting if your dispute is not settled within 45 days.

Reporting in Australia:


Reporting in New Zealand:


Concluding remarks

Late payments are a menace but thankfully, they can be handled.

The process of handling late payments can start at your internal procedures and can go beyond reporting them.

However, by reporting late payments to a database like brodmin, you are contributing towards an initiative that enables small businesses to help each other.

Reporting late payments provides you with another option to persuade non paying clients to pay their debts.

It also helps protect other businesses from getting defrauded by habitually late payers.

About the Author: Kris Broda

Krzysztof Broda Landscape resized 1 e1602958114836
As the co-founder of brodmin, Kris has more than 10 years’ experience in Trust, Fiduciary and Corporate services industry. He worked at UBS as Senior Compliance Associate and shortly moved to assist HSBC with a new project as KYC Analyst. Follow him on @realbrodmin and LinkedIn

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