Few things frustrate small business owners more than doing the work, sending the invoice and then waiting weeks or months to be paid. Government figures suggest late payments cost the UK economy around £11 billion a year and contribute to the closure of 38 businesses every day.
Help is on the way. The Small Business Protections Bill, introduced to Parliament in May, would cap payment terms for large firms dealing with smaller suppliers at 60 days, make interest on overdue invoices mandatory at 8% above the Bank of England base rate, and give the Small Business Commissioner stronger powers to investigate and fine persistent late payers. It would also ban the practice of withholding retention payments in construction contracts.
Legislation Only Goes So Far
New rules will help, but they will take time to come into force, and they won’t cover every situation. Many late payments come from other small businesses, sole traders and private clients rather than big corporates. The firms that get paid fastest tend to be the ones with tight systems of their own, and that starts with well-kept books and proactive credit control.
London-based DD Bookkeeping is one of a growing number of bookkeeping firms offering credit control alongside day-to-day bookkeeping, VAT returns and management accounts, helping restaurants, construction firms, retailers and consultants keep track of who owes what and chase it before it becomes a problem. For a busy owner, having someone else follow up overdue invoices can free up hours each month and take the awkwardness out of asking for money.
Set Clear Terms From the Start
The best way to avoid late payment is to agree terms before any work begins. Put payment terms in writing, on quotes, contracts and every invoice. Be specific: “payment due within 30 days of the invoice date” is clearer than “net 30”. For new customers or larger jobs, consider asking for a deposit or staged payments.
Make your invoices easy to pay. Include bank details, a clear reference, the due date and the name of a contact for queries. Many cloud accounting tools let customers pay by card or bank transfer straight from the invoice, which removes another excuse for delay.
Know Who Owes You, and Act Quickly
Up-to-date books give you an aged debtors report, a simple list showing who owes money and for how long. Checking it weekly makes it easy to spot slow payers early, before an overdue invoice turns into a cash flow crisis.
A consistent chasing routine works best. A polite reminder a few days before the due date, a follow-up the day after, then a phone call if payment still hasn’t arrived. Keep it friendly but firm, and keep a record of every contact. Most late payments are the result of disorganisation rather than bad intent, and a timely nudge is often all it takes.
Use the Rights You Already Have
Many small businesses don’t realise that UK law already allows them to claim statutory interest on late commercial payments, along with a fixed sum for recovery costs. The new Bill would strengthen these rights further, but they can be used today. Simply mentioning them in a reminder letter often speeds up payment.
Healthy Cash Flow, Healthier Business
Cash flow is the lifeblood of any small business. Every pound sitting in a customer’s account is a pound you can’t use to pay staff, suppliers or yourself. While new legislation should shift the balance in favour of smaller suppliers, the businesses best placed to benefit will be those that already have clear terms, accurate records and a routine for getting paid.
The new rules are a welcome step. But for most small firms, the quickest route to getting paid on time starts much closer to home.
