Dealing with late-paying customers

The real cost of late payment

When a customer pays late, the invoice is still earning you nothing while your own costs — wages, suppliers, rent, VAT — carry on regardless. Cash you have technically earned is locked inside someone else's accounts payable. For a company on thin margins, a single large invoice slipping 60 days past due can be the difference between making payroll comfortably and scrambling for it.

The damage is rarely one invoice. Late payment compounds: you delay your own suppliers, miss early-settlement discounts, lean on an overdraft, and spend hours chasing instead of selling. It is one of the leading reasons solvent, profitable companies hit a cash wall. Treating it as a serious operational risk — not an unavoidable nuisance — is the first step.

Your statutory rights to interest

For business-to-business debts, UK law gives you real teeth. Under the Late Payment of Commercial Debts legislation you can charge statutory interest of 8% above the Bank of England base rate on overdue invoices, plus a fixed sum per invoice as compensation for recovery costs — £40 for debts under £1,000, £70 for £1,000 to £9,999, and £100 for £10,000 or more. You can also reclaim reasonable additional debt-recovery costs above that fixed sum.

If you did not agree a payment term, the default is 30 days from delivery or invoice. These rights apply automatically — you do not need a clause in your contract to use them. Even if you choose not to charge interest every time, stating on the invoice that statutory interest may apply signals you know your rights, which often improves payment behaviour on its own. See the arrears and bad debt entries for the terms that follow if a debt is not collected.

Chasing harder — and its limits

Good credit control reduces late payment but never eliminates it. The fundamentals still matter: clear terms agreed up front, invoices issued the moment work is done, a polite reminder before the due date, and a firm, consistent follow-up schedule afterwards. Knowing exactly who to contact in your customer's accounts team — and making it effortless for them to pay — removes most of the friction.

But there is a ceiling. Some large customers simply pay to their own cycle no matter how well you chase, and pushing too hard risks the relationship. Chasing controls the average delay; it cannot give you cash that a customer has decided to hold for another 30 days. That gap is where finance, not pressure, is the answer.

Finance that bridges the wait

When the cash is genuinely coming but the timing hurts, finance releases it early. Invoice finance advances a percentage of an unpaid invoice as soon as you raise it, with the balance released when the customer pays — turning 60-day terms into next-day cash. A revolving credit facility does a similar job more flexibly, letting you draw to cover the gap and repay as receipts land.

Either way you stop financing your customers' working capital out of your own. Credicorp lends to the company with no personal guarantee, so bridging a late-payment gap does not put your personal assets at risk. This guide is educational and not legal or financial advice — for the precise statutory rates and how to apply them, check the current GOV.UK guidance.