What to do when a customer does not pay

Most unpaid invoices are not disputes. They are admin — the invoice went to the wrong address, it is sitting in someone's approvals queue, or the person who agreed the work is not the person who pays. Starting with that assumption gets more money in faster than starting with a threat, and it costs you nothing if you are wrong.

This is general information about how the process works in the UK, not legal advice. For anything substantial, take proper advice.

Before anything: check it arrived

Ring rather than email. "Just checking the invoice reached you — is there anything you need from me?" is not confrontational and it resolves a surprising share of late payments on the spot.

You are looking for three things: did they get it, is it going to the right person, and is there a purchase order or reference it needs to quote. Larger organisations frequently will not pay an invoice missing a reference, and nobody tells you — it simply sits there.

The escalation that works

1. A friendly nudge, by phone, a few days after the due date. Follow it with a short email so there is a written record of the conversation.
2. A firm reminder in writing a week later. State the invoice number, the amount, the original due date and a new date you expect payment by. Attach the invoice again — make it impossible for the answer to be "we never got it".
3. A final reminder that says what happens next and when. This is the point at which you mention statutory interest and, for a business debtor, your intention to claim it.
4. A letter before action. Formal, dated, setting out the debt and giving a deadline to pay before you start a court claim.
5. A claim, if it is still unpaid and worth pursuing.

Keep every step polite and factual. Anger is satisfying and it slows things down, because it gives a reluctant payer a reason to make it about you rather than about the money.

What you are entitled to on a late commercial debt

If your customer is another business, the Late Payment of Commercial Debts legislation gives you rights that many small businesses never use:

• Statutory interest at 8% above the Bank of England base rate, running from the day payment was due.
• Fixed compensation for the cost of chasing — £40, £70 or £100 depending on the size of the debt.
• Reasonable recovery costs above that fixed sum where they exceed it.

If you agreed no payment terms, the default for business-to-business is 30 days from the invoice or from delivery, whichever is later. You do not have to claim the interest, and mentioning that you are entitled to it is frequently enough on its own — it signals you know the rules.

Consumers are different. There is no automatic statutory interest against a private individual unless your contract provides for it, which is one good reason to have written terms.

The letter before action

Before starting a court claim you are expected to give the debtor a proper chance to pay. Where the debtor is an individual or a sole trader, there is a specific pre-action protocol for debt claims setting out what the letter must contain and how long they get to respond — and it is a genuinely generous period, so allow for it.

The letter should state who owes what, why, the invoice and dates, what you want, by when, and that you will start a claim if it is not paid. Send it by a method you can evidence. Courts take a dim view of a claimant who skipped this step.

Making a claim

For straightforward money claims in England and Wales, Money Claim Online handles it. The small claims track covers claims up to £10,000, it is designed to be used without a solicitor, and the fee scales with the amount — recoverable if you win.

Two honest cautions. Winning is not the same as being paid; if the debtor has no money, a judgment is a piece of paper and enforcement costs more. And for small sums, your own time is frequently worth more than the debt. Decide what the number is below which you will write it off and move on, and decide it before you are angry.

Leverage that is not the courts

• Stop work. If the job is ongoing and your terms allow it, pausing is the most effective lever there is. Say so plainly and unemotionally.
• Withhold what you still hold — final files, certificates, keys — where your terms permit and it is lawful to do so.
• Talk to the person who actually pays. Frequently nobody has told accounts the job is finished.
• Offer a payment plan. Getting paid slowly beats not getting paid, and a customer in genuine difficulty will often agree to something they can meet.

Stopping it happening again

Almost every unpaid invoice traces back to something that was not agreed at the start.

• Written terms, even one paragraph. When payment is due, what interest applies, what happens if it is late.
• A deposit on anything substantial, and stage payments on anything long. Never carry the whole cost to the end.
• Invoice the day the work finishes. Payment terms start when you invoice, and the commonest cause of slow payment is slow invoicing.
• Make paying easy. A payment link in the invoice removes the "I'll do it when I'm at the computer" delay, which is where a fortnight goes.
• Credit-check anything large from a business you do not know. Company accounts are public.

The bottom line

Assume admin before you assume bad faith, then escalate in writing on a schedule: nudge, firm reminder, final reminder, letter before action, claim. Know that a late commercial debt carries 8% above base plus fixed compensation, invoice the day you finish, and take a deposit next time. Most of this problem is prevented at the quoting stage. See also writing a quote that wins the job.