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Slow-paying customer:
what to do and how to bridge the gap.
Late payment is the biggest single cause of business cash flow problems in the UK. This guide covers credit control, statutory interest, formal demand, court action — and how invoice finance and short-term working capital can bridge the gap while you wait.
Your legal rights when a customer pays late
The Late Payment of Commercial Debts (Interest) Act 1998 gives businesses automatic rights when a commercial customer pays late:
- Statutory interest at 8% above the Bank of England base rate per annum, from the day after the payment due date. No special clause in your contract is needed.
- Fixed debt recovery fee: £40 for debts under £1,000; £70 for debts between £1,000 and £9,999; £100 for debts of £10,000 or more.
- Reasonable recovery costs if the fixed fee does not cover your actual recovery costs (such as solicitor fees for larger disputed debts).
These rights apply automatically to B2B transactions. You do not need to include a late payment clause in your contract — though doing so (including the rate) makes the position clearer for both parties.
Credit control that prevents late payment
- Credit check new customers before agreeing terms. Commercial credit bureaux (Experian, Equifax, Creditsafe) provide business credit reports. A customer with a history of late payment or CCJs is a higher risk — agree shorter terms or require upfront payment.
- Agree payment terms clearly in writing before work starts. Verbal terms are enforceable but harder to prove. Email confirmation of the agreed payment date (not just the payment period) is good practice.
- Invoice immediately. The clock starts when the invoice is delivered. Delaying invoicing delays payment. Issue invoices on the day goods are delivered or services completed.
- Use direct debit collection where possible. GoCardless and similar services collect payment automatically on the due date. It removes the reliance on the customer remembering to pay.
- Set and monitor customer credit limits. Know the total outstanding from each customer. Pause work or new orders when a customer's outstanding balance exceeds the agreed limit.
How to recover a late commercial payment
- Contact the customer immediately when payment is late. A polite call or email on the day after the due date is standard credit control. Most late payments are administrative errors that are resolved quickly when chased. Record all contact (date, time, who you spoke to, what was agreed).
- Send a formal written demand with statutory interest notice. If a phone chase does not produce payment within 7 days, send a formal written demand stating the invoice number, amount, due date, the statutory interest now accruing, and the fixed debt recovery fee. Set a clear deadline of 7–14 days to pay.
- Consider invoice finance to bridge the cash flow gap while chasing. Credicorp's Slice product advances a proportion of the outstanding invoice value immediately — so the business does not have to wait 30, 60, or 90 days while the recovery process runs. Apply at credicorp.co.uk.
- Escalate to a letter before action, then court if needed. If the formal demand does not produce payment, send a letter before action giving 14 days. For debts up to £10,000, the small claims track is straightforward and can be filed online at money-claim.service.gov.uk. A judgment can then be enforced via a warrant of control (bailiff) or charging order.
Late payment questions
What is considered late payment for a business invoice in the UK?
Under the Late Payment of Commercial Debts (Interest) Act 1998, a business debt is late once the agreed payment date passes. If no payment date was agreed, the default statutory period is 30 days from the date the invoice was delivered or goods or services were provided (whichever is later). For public sector customers, the default is 30 days. Many businesses agree longer terms in their contracts — 60 or 90 days is common in some sectors — and payment is only late once those contractual terms have expired.
Can I charge interest on a late business invoice?
Yes. Under the Late Payment of Commercial Debts (Interest) Act 1998, businesses can charge statutory interest on overdue commercial debts at 8% above the Bank of England base rate per annum. This right exists automatically — no special clause in the contract is needed. In addition to interest, businesses can also claim a fixed debt recovery fee: £40 for debts under £1,000, £70 for debts between £1,000 and £9,999, and £100 for debts of £10,000 or more. These rights apply to B2B transactions — not to consumer debts.
What are the steps in a commercial debt recovery process?
The typical escalation is: (1) a reminder before the due date (a courtesy call or automated email); (2) a chaser on or shortly after the due date; (3) a formal written demand, making clear that statutory interest is now accruing; (4) a letter before action (LBA) — the formal step before court action — giving the debtor a fixed period (typically 14 days) to pay; (5) a county court claim (for debts up to £100,000, via MCOL online); (6) enforcement of a judgment, if obtained — a charging order, warrant of control, or attachment of earnings. Most commercial debts are resolved at stages 1–3.
How can I protect my business against slow payers in the future?
Prevention is more effective than recovery. Practical steps: (1) conduct credit checks on new customers before agreeing terms (use a commercial credit bureau); (2) agree payment terms clearly in writing before work begins, and include late payment interest clauses in contracts; (3) issue invoices immediately on delivery of goods or services — do not delay invoicing; (4) use direct debit or automated payment collection rather than waiting for BACS transfers; (5) set credit limits per customer and monitor exposure; (6) invoice finance (Credicorp Slice) can convert outstanding invoices into immediate cash while the customer pays in their own time.
Can Credicorp help a business manage cash flow while waiting for a customer to pay?
Yes. Credicorp's Slice product is invoice finance — the business raises an invoice, and Credicorp advances a proportion of the invoice value immediately, with the remainder (minus Credicorp's fee) paid when the customer settles. This bridges the gap between invoicing and payment, meaning the business does not have to wait 30, 60, or 90 days for cash. The Bridging Loan and Flex facility also provide short-term working capital for businesses whose cash flow is under pressure from late payers. Apply at credicorp.co.uk.
Related guides
For Credicorp's invoice finance product (Slice), read what is invoice finance? For how the cash-flow gap arises and how to bridge it, read the cash-flow gap, explained. For reading bank statements the way a lender does, read reading your own bank statements. All the guides are on the Learn hub.
Don't wait for the customer to pay. Invoice finance advances cash now.
Credicorp's Slice converts outstanding invoices into immediate working capital — while the customer pays in their own time.