Most overdue invoices are not disputes, they are drift. Here is the order to work through before the debt gets harder to recover.
Most unpaid invoices are not really disputes. They are drift. The customer meant to pay, something else took priority, and the longer it sits the more awkward it feels for both sides to pick up the phone. The single biggest predictor of whether a debt gets recovered is how quickly it is dealt with, so the order you work through matters.
Before chasing anybody, make sure the invoice is actually enforceable. Was it sent to the right person at the right address? Does it match a purchase order or a signed contract? Do your terms state a payment period, and were those terms brought to the customer's attention before the work started?
This sounds basic, but a surprising number of debts stall because the paperwork will not support them. Fixing it later is much harder than checking it now.
A generic reminder invites a generic non-answer. Reference the invoice number, the amount, the date it fell due and the agreed payment terms, then ask a direct question that is hard to ignore: is there a reason this has not been paid, and what date will it be settled?
Put it in writing and keep a copy. Everything you send from this point becomes part of the record if the debt later needs formal action.
If the customer comes back with a reason, write it down and confirm it by email. There is a real difference between "we are short this month" and "we are not paying because the work was defective". The first is a cashflow problem you can build a payment plan around. The second is a dispute, and disputes need resolving before recovery, not after.
A useful test: if the customer has never raised a complaint about your work until the moment you asked to be paid, that is usually a delaying tactic rather than a genuine dispute. Ask them to put the complaint in writing with specifics. Most do not.
For business to business debts, the Late Payment of Commercial Debts (Interest) Act 1998 gives you a statutory right to claim interest at 8% above the Bank of England base rate, plus a fixed sum in compensation: £40 for debts under £1,000, £70 for debts between £1,000 and £9,999.99, and £100 for debts of £10,000 or more.
Many businesses never mention it. Doing so signals that you know your position and that the cost of not paying you is going up.
A letter before action is the formal step before court, and it is often the point at which payment arrives. It sets out what is owed, why, what you want and by when, and what will happen if nothing is paid. Get it wrong and it carries no weight. Get it right and a lot of debtors decide the argument is not worth having.
There is a point where continuing to chase costs you more in time and goodwill than the debt is worth to pursue yourself. Bringing in a third party changes the dynamic. The conversation stops being between two trading partners with a relationship to protect and starts being a straightforward matter of settlement.
It also frees up whoever in your business has been carrying it, which is usually someone whose time is better spent elsewhere.
Debts get harder to recover with age. Records go missing, contacts leave, companies restructure and in some cases dissolve. There is also a legal limit on how long you have. Acting in the first few months gives you far more options than acting after a year.
Check your own paperwork first, then chase in writing with the invoice number, the amount, the due date and a direct question about when it will be paid. If that gets nowhere, add the statutory interest and compensation you are owed, send a letter before action, and if there is still no payment, pass the debt to a collection agency or start a court claim.
If no payment date was agreed, gov.uk guidance says payment is late 30 days after the customer receives the invoice, or 30 days after you deliver the goods or service if that is later. Where a date is agreed, it should usually be within 60 days between businesses, or 30 days for public authorities. A longer period between businesses is allowed if it is fair to both sides.
Generally only where there is a genuine dispute about what was supplied, for example if the goods or the work were not what was agreed. Ask for any complaint in writing, with specifics. A complaint that appears for the first time when you ask to be paid is often a delaying tactic rather than a real dispute.
Yes, on business to business debts. Under the Late Payment of Commercial Debts (Interest) Act 1998 you can claim interest at 8% above the Bank of England base rate, a fixed sum of £40, £70 or £100 depending on the size of the debt, and your reasonable costs of recovering it.
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