Overdue invoices: how to chase late payments and get paid

An overdue invoice is one that hasn't been paid by its due date. The best way to deal with overdue invoices is to act quickly, follow the same chasing process every time and use your legal right to charge interest and a fixed fee on late business payments. Most overdue invoices can be settled with a prompt call and a clear reminder, long before you need to think about formal debt recovery. Late payment is a serious risk for smaller businesses. Research carried out for the Department for Business and Trade found that late payment forces around 14,000 UK businesses to close every year, the equivalent of 38 businesses a day. This guide covers when an invoice counts as overdue, how to chase it, what to say in your reminders, how much you can charge in interest and fees, and when it's time to escalate.

When is an invoice overdue?

An invoice becomes overdue the day after the payment date you agreed with your customer. If you agreed 30 day terms on an invoice dated 1 March, it's overdue from 1 April. If you didn't agree a payment date, UK law treats a business payment as late 30 days after your customer receives the invoice, or after you deliver the goods or service if that's later. Agreed terms between businesses should usually be no longer than 60 days, although a longer period is allowed if it's fair to both businesses. Public authorities should usually pay within 30 days. This matters because the date an invoice becomes overdue is also the date your right to charge statutory interest begins. Putting a clear due date on every invoice, rather than "payment on receipt" or no date at all, removes any argument about when the clock started.

What should you do when an invoice becomes overdue?

The first thing to do when an invoice becomes overdue is check that nothing on your side is holding it up. A surprising number of late payments come down to a simple problem that's quick to fix once you spot it. Before you send a firmer reminder, check:

• The invoice went to the right person or accounts payable inbox.

• It shows any purchase order number or reference your customer needs to approve it.

• The amount, the description of the work and your bank details are correct.

• Your customer hasn't raised a query about the goods or service that's still waiting for an answer.

Then pick up the phone. A short call to the person who approves payments often tells you more than three emails. You'll find out whether the invoice is in the next payment run, stuck waiting for sign off or being held back for a reason you need to deal with. Make a note of what you're told and confirm any promised payment date by email afterwards.

How do you chase an overdue invoice?

You chase an overdue invoice by following a set timeline, moving from a friendly reminder to firmer contact as each stage passes. Using the same process for every customer means nothing gets missed, and customers learn that late payment always gets followed up. The timeline below is a typical example. You can adjust the timings to suit your payment terms and the size of the invoice.

Your accounting software can send most of these reminders automatically. Xero, QuickBooks and Sage all let you schedule reminder emails before and after the due date, so you only need to step in for the calls and the final stages. If you have several overdue invoices at once, chase the largest amounts and the customers showing the clearest warning signs first. Connecting your accounting software to Capitalise's Credit Risk Manager shows the credit risk behind each unpaid invoice, so you can see which customers to chase first.

What should an overdue invoice reminder say?

An overdue invoice reminder should make it easy for your customer to pay straight away. Every reminder should include:

• The invoice number, the original invoice date and the date payment was due.

• The amount outstanding, including any part payments already received.

• How to pay, with your bank details or a payment link.

• A copy of the original invoice attached, so nobody has to search for it.

• A named contact your customer can speak to if there's a problem.

Keep the first reminder short and assume a genuine oversight. For example:

Hi, I hope you're well. Invoice 1042 for £2,400 was due for payment on 15 May and we don't seem to have received it yet. I've attached a copy for you. Could you let me know when we can expect payment? Many thanks, Alex.

Later reminders should be firmer and give a clear deadline. For example:

Hi, invoice 1042 for £2,400 is now 30 days overdue. Please arrange payment by 21 June. If we don't receive payment by then, we'll add statutory interest and a fixed recovery fee under the Late Payment of Commercial Debts (Interest) Act 1998 and begin formal debt recovery. Please call me on 01234 567890 if there's a reason the invoice can't be paid.

Stay professional at every stage. Reminders that are aggressive or sent too often can damage the relationship and, if the debt ever reaches court, reflect badly on your business. Our credit management compliance checklist covers the rules on how you can chase a debt.

Can you charge interest on overdue invoices?

You can charge interest on overdue invoices to other businesses, whether or not your contract mentions it. The Late Payment of Commercial Debts (Interest) Act 1998 gives you the right to claim statutory interest of 8% plus the Bank of England base rate on late business to business payments. If your contract sets its own late payment interest rate, that rate applies instead. The base rate used isn't the rate on the day you calculate it. The law fixes it twice a year: interest that starts running between 1 July and 31 December uses the base rate in force on 30 June, and interest that starts between 1 January and 30 June uses the rate on 31 December. The base rate was 3.75% on 30 June 2026, so statutory interest on invoices that became overdue between 1 July and 31 December 2026 is 11.75% a year. The Bank of England raised the base rate to 4% on 5 November 2026, so unless it changes again before 31 December, interest that starts running from 1 January 2027 will be 12%.

Statutory interest is simple interest, so you work it out as a daily amount. For a £5,000 invoice that became overdue in August 2026:

• Annual interest is £5,000 × 11.75%, which is £587.50.

• Daily interest is £587.50 ÷ 365, which is about £1.61.

• After 60 days overdue, the interest owed is about £96.58.

How much can you charge as a late payment fee?

On top of interest, you can claim a fixed sum towards the cost of recovering the debt. The amount depends on the size of the invoice.

You can claim the fixed sum once for each late payment, so a customer with three overdue invoices could owe three fixed sums. If your reasonable costs of recovering the debt are higher than the fixed sum, you can claim those too. In the example above, the £5,000 invoice would carry a £70 fixed sum as well as the interest. To claim interest and fees, send your customer a new invoice or statement that sets out the amounts and how you calculated them. Many businesses choose to waive interest for a good customer who pays once reminded, then charge it consistently to those who pay late again and again. Whichever approach you take, stating your late payment terms on every invoice means customers know the cost of paying late before it happens.

What if your customer disputes the invoice or can't pay?

If your customer disputes the invoice, find out exactly which part they disagree with and why. They should still pay any part of the invoice that isn't in dispute, so ask for that amount now while you resolve the rest. Put your response in writing and keep copies of delivery notes, timesheets or signed approvals that support your position.

If your customer accepts they owe the money but can't pay it all at once, a payment plan is often the quickest way to recover the debt. Agree the amount and date of each payment in writing, along with what happens if a payment is missed. Getting regular payments is usually better than waiting months for a lump sum that may never arrive.

If you're a small business with fewer than 50 staff and the overdue invoice is owed by a larger business with more than 50 employees, the Small Business Commissioner can help. Its service is free, and it can look into your complaint and make recommendations on how the dispute should be settled.

Should you stop working for a customer with overdue invoices?

Putting an account on stop, which means pausing new orders or work until overdue invoices are paid, is one of the most effective ways to get paid. It gives the customer a strong reason to settle up and stops you adding more unpaid work to a debt that's already late. It works best when it's written into your terms from the start, so it doesn't come as a surprise. Before you put a regular customer on stop, think about how much future work they bring and whether a short conversation or a payment plan might solve the problem without losing the account.

It's also worth checking whether a customer's position has changed. An existing customer who suddenly starts paying late may be under financial pressure, and a fresh company credit check can show a falling credit score or a new county court judgment (CCJ) before you take on more work for them.

How will the Commercial Payments Bill change overdue invoices?

The Commercial Payments Bill has completed its stages in the House of Lords and now moves to the House of Commons. It would give smaller businesses more protection from late payment. As proposed, it would:

• Cap payment terms at 60 days when larger businesses pay smaller suppliers, with limited exceptions.

• Stop contracts from excluding or reducing the right to statutory interest, making it mandatory.

• Give the Small Business Commissioner stronger powers to investigate persistent late payers and issue penalties.

• Let suppliers claim a fixed sum when a customer raises a dispute late or without enough detail.

The Bill isn't law yet and could change before it is, and most of its measures will need regulations to set a start date. Until it comes into force, the current late payment rules in this guide still apply.

When should you escalate an overdue invoice to debt recovery?

You should escalate an overdue invoice when your customer has ignored your final reminder, stopped replying or broken an agreed payment plan. At that point, more reminders are unlikely to work, and each week you wait gives the debt more time to become harder to recover. Our guide to debt recovery for small business walks through each step, including court fees and what to do if a customer can't pay at all. Formal debt recovery usually starts with a letter before action, followed by a debt collection agency or a county court claim if the customer still doesn't pay. The best way to reduce how many invoices become overdue in the first place is to set clear terms and invoice promptly. Our guide to habits that help small businesses get paid faster covers the steps to take before an invoice is due.

Stop waiting on overdue invoices with invoice finance

Chasing overdue invoices takes time, and your bills, wages and suppliers still need paying while you wait. Invoice finance releases up to 90% of an invoice's value as soon as you raise it, so your cash flow no longer depends on when customers decide to pay. You receive the rest, minus fees, once the invoice is settled. Capitalise works with a panel of 130+ lenders, including specialist invoice finance providers, so you can compare options that suit your turnover and the way your customers pay. Apply for invoice finance with Capitalise today and see which lenders could help you get paid on your invoices sooner.