How to Chase Unpaid Invoices

Dealing with unpaid invoices can be one of the most frustrating parts of running a small business or working as a freelancer. After delivering your service or product, you expect to receive payment within the agreed-upon payment terms. That’s how invoicing is supposed to work.

The trouble begins when the usual 30-day window passes and the invoice becomes an overdue invoice. Now, instead of focusing on growing your business, you’re stuck chasing invoices and trying to get what you’re owed.

Recent data shows that around 62% of small businesses report being impacted by late payments, with £112 billion of capital locked up in late payment disputes.

Maintaining a strong cash flow is essential to every company’s success. That’s why it’s vital to understand how to deal with late payment situations, including when and how to send invoice reminders or even consider adding late payment fees.

If you find it uncomfortable to chase unpaid invoices, don’t worry — this guide will walk you through your options. We’ll show you how to deal with late or unpaid invoices and what to do if they still don't pay the invoice.

Initial Steps: What To Do if a Customer Doesn’t Pay?

Collecting past-due invoices is, unfortunately, a common challenge that most businesses face at some point. While chasing payments can feel like a waste of time, it’s often necessary to protect your cash flow and keep your business on track. It may feel uncomfortable at first, but it’s a professional and expected step.

After all, you've completed the service, and the client is satisfied; therefore, you're entitled to prompt payment according to the agreed payment terms. In fact, not following through with a payment reminder will only encourage late payments in future.

Unfortunately, late payments will divert your focus away from serving your existing clients and improving your business operations. But since consistent income is vital to your business’s survival, you need clear processes for handling overdue invoices.

Here are some practical tips for dealing with late or unpaid invoices effectively.

Make Sure You Followed the Right Procedure

Before jumping to conclusions or sending a strongly worded message, take a moment to make sure that you've followed the correct invoicing process. Did you send the invoice? Were the payment terms clearly stated? Was the invoice amount correct? Did it go to the right contact person?

It can be awkward and unprofessional to confront a client only to find out the delay was due to your oversight. Sometimes an unpaid invoice slips through the cracks due to an honest mistake, a spam filter, or a client being away or dealing with an emergency.

Start by sending a polite, professional invoice reminder. Often, a simple “Just checking in” message is all it takes to prompt payment and preserve a positive relationship with the client. Avoid using “past due” language at this early stage unless you're certain the invoice is late and all procedures were followed.

To avoid these issues in future, consider using a reliable invoice software solution. These tools help track sent invoices, confirm receipt, and automate payment reminders, reducing the chances of human error or missed communication.

Set Payment Expectations Early

While talking about money can feel awkward, clearly outlining your payment terms from the start helps prevent misunderstandings and late payments down the line. Let your client know exactly when you’ll send the invoice and how long they have to pay it.

Most small businesses and freelancers use standard 30-day payment terms, though some larger companies may operate on 60-day cycles. Depending on the nature of the work, it’s also common to request an upfront payment or a deposit before starting a project.

Consider using a clear and professional invoice template that includes due dates, payment methods, and late fee policies. Setting expectations early on helps avoid disputes later and keeps your cash flow predictable.

Send a Friendly Payment Reminder

If a client hasn’t paid their invoice by the due date, it’s a good idea to send a polite payment reminder as soon as possible. In many cases, the payment delay is unintentional, and the invoice may have just been overlooked or lost in a busy inbox.

Keeping your tone professional and friendly at this point is key. Include the payment details again (such as the amount, due date, and accepted payment methods) to make it easy for the client to pay right away.

To stay on top of your invoicing, set a calendar reminder when you issue each invoice so you can follow up promptly if needed. Better yet, use invoice software that offers automated invoicing and scheduled invoice reminders to take care of follow-ups without additional manual effort.

Inform Clients About Late Payment Fees and Interest Charges

The Late Payment of Commercial Debts (Interest) Act 1998 provides UK businesses the right to charge statutory interest (currently 8% above the Bank of England base rate) and claim reasonable compensation for recovery costs if a payment is late.

If no payment terms were agreed in advance, the payment becomes overdue 30 days after the later of the following:

• The goods or services were delivered.
• The customer received the invoice.

If you do decide to apply a late payment fee, make sure your policy is clearly stated in your contracts or invoices. For example, you might decide to charge 2% interest after 30 days, rising to 3% after 60 days. Whatever your approach, it’s important to let clients know upfront that unpaid invoices may incur interest or additional charges if left unsettled.

Being transparent about these terms will not only encourage timely payment but also help protect your cash flow and reduce the potential need for formal debt collection action.

Follow Up with a Phone Call

Sometimes, the most effective way to resolve an overdue invoice is with a personal phone call. Speaking directly with your client adds a human touch that email reminders may lack and can help communicate the urgency of the situation without sounding aggressive.

A quick call can often reveal the reason behind the late payment, whether it’s a simple oversight, a payment dispute, or a cash flow issue on their end. By speaking to them directly, you have a better chance of finding a mutually agreeable solution and avoiding escalation.

While it may feel uncomfortable to pick up the phone, regular communication is an important part of chasing invoices professionally and maintaining a good client relationship.

Send a Late Invoice Letter Reminder

If a friendly email or phone call hasn’t worked, sending a more formal late invoice letter can help prompt action. Your first written payment reminder should still be polite and professional. The goal is to nudge, not alienate, the client.

Sometimes, simply stating that the invoice is now overdue and reattaching the original can be enough. Here’s an example of a simple but effective message:

Hello John,

This is a quick reminder that invoice 155 is now past due. I’d really appreciate it if you could settle this as soon as possible. For your convenience, I’ve reattached the invoice.

Thank you very much,
Nick

This kind of invoice reminder keeps communication friendly while reinforcing the need for timely payment.

Next Steps: What To Do if a Customer Still Doesn’t Pay

Most payment disputes can be avoided or settled with a polite reminder if you have a clear invoicing process in place, but what can you do if your client refuses to pay?<

Before giving up, make sure you've exhausted all reasonable efforts: resending the unpaid invoice, following up via phone, and sending a formal late payment letter. If none of these work, you may need to initiate more formal measures.

While pursuing legal action may feel daunting, remember you’re entitled to be paid for the work or services you’ve delivered. In some cases, you may be able to initiate debt recovery through a third-party collection agency or file a claim in the small claims court if the amount is within the legal threshold.

If the debt is a business-to-business transaction with clear terms and little factual dispute, legal proceedings can often be straightforward. The key is to stay professional, document everything, and know your rights.

Ultimately, protecting your cash flow and standing up for your business is not just about this one invoice; it’s about setting boundaries that help ensure clients take you seriously in the future.

Issue a Late Payment Notice

Before initiating any legal action, it’s important to send a formal late payment notice to the client. This letter should clearly state that the invoice remains unpaid and that legal steps will be taken if payment isn’t received by a specific deadline.

Include the total amount due, the original invoice number, and any late payment interest or compensation fees being charged, as permitted by UK law. This step often prompts payment without the need for further escalation.

File a Court Claim

If the customer still doesn’t pay, your next option is to begin court proceedings. In England and Wales:

• Claims valued up to £10,000 are normally allocated to the Small Claims Track (County Court).
• Claims between £10,000 and £25,000 are normally allocated to the Fast Track (County Court).
• Claims over £25,000 are normally allocated to the Intermediate or Multi-Track.
• Claims above £100,000 (or specialist matters) may be handled in the High Court.

To file a claim, you’ll need to pay a court fee, which varies based on the amount of the claim. Visit the GOV.UK website for guidance on how to take legal action against non-paying clients.

What Happens at a Court Hearing

If a court hearing is required, which is more likely for claims over £10,000, you may face additional court fees. You typically won’t need a solicitor for small claims, but it’s advisable to seek legal advice for larger or more complex cases.

If the court rules in your favour and the customer fails to contest the claim, the court will issue a judgement requiring the consumer to pay. A county court judgement will be used for small claims. If the consumer fails to pay within a month, a judgment is entered against them and remains in effect for six years, making it difficult for them to obtain credit.

Consider Mediation Before Going to Court

Courts generally prefer disputes to be resolved without a formal hearing. For claims under £10,000, you may be encouraged to use the court’s mediation service to reach an agreement with the client.

Mediation is a form of dispute resolution that can help you settle an unpaid invoice out of court. This often saves time, stress, and costly legal fees. If you manage to successfully settle the matter through mediation, you may even be eligible for a refund for part of your court fee.

Be aware that a judge may decline to award you costs if there is proof you have made no effort to settle the invoice out of court.

Consider Using a Debt Collection Agency

If all other attempts have failed, you may consider hiring a professional debt collection agency to help recover the money from your outstanding invoice. These agencies specialise in debt recovery and may be able to resolve the issue more quickly, often without having to go to court.

Typically, a debt recovery agency will charge a commission, which will be a percentage of the amount recovered. Make sure you understand their fee structure before agreeing to their terms. While debt collection can carry a negative stigma, many agencies operate ethically and professionally. To find a reputable provider, check the Credit Services Association, which lists trusted and accredited members.

Keep in mind that unless you have a statutory demand or a court judgment in your favour, a debt collection agency has limited legal power. However, the added pressure and formal tone may encourage payment from clients who continue to ignore direct communication.

Court Action Costs for Unpaid Invoices

The cost of taking legal action depends on the value of the claim.

If you're pursuing an undisputed debt, you can use Money Claim Online to file a claim for any amount that's under £100,000. Fees start at £35 for claims that are up to £300, and rise on a sliding scale depending on the value of the claim. For claims above £200,000, there is a fee limit of £10,000.

For claims handled through fast-track processes, court fees usually range from £27 (claims under £300) to £1,334 for multi-track cases.

However, it’s important to note that even if you win, you may not be able to recover your legal costs in full, particularly within the small claims track, where cost recovery is limited.

Before proceeding, weigh the potential return against the legal expenses involved. If the amount owed is relatively small, it might be more cost-effective to consider alternatives like mediation or a debt collection agency first.

Conclusion

Chasing late or unpaid invoices is rarely enjoyable, but it's a necessary part of maintaining a healthy cash flow and protecting your business. Fortunately, with the right systems and communication in place, it’s possible to reduce the likelihood of late payments and deal with them effectively when it does happen.

The key is to be proactive: build strong relationships with your clients, set clear payment terms up front, and maintain organised invoicing processes. Always invoice accurately and on time, and follow up professionally if payments are delayed. For clients with longer payment cycles, consider negotiating terms or exploring options like invoice finance to keep your cash flow steady.

Long payment terms can severely restrict growth, especially for smaller or fast-paced businesses. Understanding how to navigate these challenges, from using vendor portals properly to escalating persistent non-payments, will empower you to take control of your revenue and avoid unnecessary delays.

Checklist: How to Handle Late or Unpaid Invoices

• Send accurate invoices promptly with clear payment terms
• Set reminders for invoice due dates
• Send a friendly payment reminder when the invoice becomes overdue
• Double-check that the invoice was sent correctly and to the right person
• Follow up with a phone call to discuss the issue personally
• Send a formal late payment letter or email with a reattached invoice
• Inform clients in advance if interest charges or late payment fees apply
• Consider mediation or negotiation to resolve payment disputes
• Use a reputable debt collection agency if necessary
• Pursue legal action as a last resort — via Money Claim Online or small claims court

By following a clear process and staying organised, you’ll not only reduce the stress of chasing invoices but also build a more resilient and financially secure business.