Chasing late payments

Prevention is most of the answer

Take payment at the point of work wherever you can. A card tapped on the doorstep never becomes a receivable. The whole problem is created by invoicing when you did not need to.

Take a deposit before you buy materials. A boiler, a set of tyres or a bespoke worktop should not be funded from your own account on the strength of goodwill.

Put terms in writing before you start, not on the invoice afterwards. Payment due on completion, or within seven days, is a perfectly normal term for a small business and far shorter than the thirty days people default to out of habit.

Invoice the same day you finish. An invoice that arrives a fortnight late signals that you are relaxed about being paid, and it will be treated accordingly.

The escalation that works

On the due date, an automatic reminder. Neutral, no emotion, just the invoice and a payment link. Most invoices settle here, because most late payment is forgetfulness rather than refusal.

Seven days late, a short personal message. A text or a call beats an email. "Just checking the invoice from the third landed, is there anything you need from me?" Give them the exit of it being your paperwork rather than their failure.

Fourteen days late, a firmer written note stating the amount, the original due date and that interest and costs may be applied. This is the point to stop being apologetic.

Thirty days late, a formal letter before action stating exactly what is owed, what you will do and by when. Most disputes settle at this stage because it is the first message that reads as a decision rather than a request.

Interest and costs you are entitled to

For business to business debts, the Late Payment of Commercial Debts legislation lets you charge statutory interest at the Bank of England base rate plus eight per cent, plus a fixed sum for recovery costs that rises with the size of the debt.

Most small businesses never apply it, which is a shame, because mentioning it politely in the fourteen day message changes the tone of the conversation immediately.

This applies between businesses. Debts owed by consumers work differently, and your right to charge interest there depends on what your terms said before the work started.

Check the current rates on GOV.UK before quoting a figure, because the base rate moves.

When it will not settle

Money claims for smaller debts can be started online through the government service, and the fee is modest and recoverable. It is more accessible than most people assume.

Before you go there, be honest about the evidence. A signed quote, a dated invoice, proof of delivery of the work and a record of every chase will win. A verbal agreement and a memory will not.

Decide a walk-away number in advance. Beyond a certain point the hours you spend chasing cost more than the debt, and knowing your line stops a small sum consuming a month of your attention.