Summary
If customers keep paying late, chase the day after the due date, start statutory interest and the £40 to £100 fixed sum from day one, add a statement, then escalate to a Letter of Claim at 30 days and a decision on collections or court at 60 to 90 days.
- The number: A £12,000 invoice 30 days late picks up £115.89 in statutory interest plus a £100 fixed sum, taking the balance to £12,215.89.
- The legal basis: The Late Payment of Commercial Debts (Interest) Act 1998 gives every UK business interest at 8% above the Bank of England base rate plus a fixed sum, with no clause needed in the contract.
- Automate it: Paidnice posts the interest and fixed sum to the ledger in Xero or QuickBooks Online and recalculates the statement balance at the moment it sends.
Late payment in the UK is routine rather than rare. Roughly 68% of UK B2B sales are made on credit, and late payment affects about 25% of invoiced B2B turnover (Atradius UK 2026). Xero's UK data for the June 2026 quarter puts the average wait to be paid at 29.1 days, 8.3 days past due. One late payment is normal. The same customer late every month is a process gap.
The order of the steps matters. Most founders jump from a polite reminder to an angry phone call with nothing in between, and the customer learns that nothing happens. Each step below adds a cost or a consequence the customer can see, and the first three can run from software without you.
Customers paying invoices late: what to do
Six actions, in order. The first three fix a late-paying customer for good. The last three are for the invoice that is already stuck.
- Day 1 lateSend the first reminder the day after the due date, with the invoice attached. Practitioners commonly advise chasing the day after the invoice falls due. The reason is simple: the customer's accounts team pays the suppliers who ask. Add a payment link. Templates: payment reminder email templates.
- Day 1 lateStart the statutory interest clock and tell them. Under the Late Payment of Commercial Debts (Interest) Act 1998, interest at 8% above the Bank of England base rate accrues automatically from the day after the due date, with no notice needed. State it on the invoice and in the reminder so it changes behaviour. The figures are in the table below.
- Day 7 to 14Add the fixed compensation sum to the balance and send a statement. The Act gives you £40, £70, or £100 per invoice by invoice size, on top of interest. Post it to the ledger, then send a statement showing invoice, interest, and fixed sum as one balance. Bookkeepers reconcile against statements, so the whole balance enters the payment run.
- Day 14 to 21Phone the person who signs the payment run, and name a date. Ask one question: which payment run is this invoice in? If the answer is a date, note it and hold them to it. If the answer is a dispute, treat it as a dispute (see the late-payer types below), pause the fees on that invoice, and resolve it in writing.
- Day 30Send a Letter of Claim. When the customer is an individual or sole trader, the Pre-Action Protocol for Debt Claims requires a Letter of Claim before court, sent by post, giving the debtor 30 days to respond (Ministry of Justice). Use the Letter Before Action template.
- Day 60 to 90Choose: collection agency, small claims, or the Small Business Commissioner. Common guidance places the agency decision at 60 to 90 days overdue. The small claims track in England and Wales covers claims up to £10,000. Against a larger customer, the Small Business Commissioner runs a free complaints service, which closes once legal action starts. Decision guide: when to send an invoice to collections.
Steps one to three are the same for every customer on every invoice, so they belong in software. Xero's own reminders handle step one. Steps two and three need an add-on that posts the interest and fixed sum to the ledger and sends the statement on a schedule, which is what credit control add-ons like Paidnice do on Xero and QuickBooks Online.
How many days late is considered a late payment?
An invoice is late the day after its agreed due date, whether that is one day or 90 days overdue. There is no legal threshold to cross first: the due date on the invoice or contract is the only test.
UK statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 starts accruing from that first day, with no grace period required and no notice needed. If no due date was agreed, the invoice becomes late 30 days after the customer receives it or you deliver, whichever is later.
How much statutory interest and compensation can you add to a late invoice
On a £12,000 invoice 30 days late, statutory interest at 8% plus base rate comes to £115.89 and the fixed sum adds £100, so the customer owes £12,215.89. The table shows three invoice sizes at 30, 60, and 90 days.
The formula: invoice value × (8% + base rate) ÷ 365 × days late, plus the fixed sum for the invoice's band. The table uses the Bank of England base rate of 3.75%, held at the 17 June 2026 meeting, so 11.75% per annum for the half-year from 1 July 2026. The statutory rate is fixed in six-month blocks; an invoice spanning two blocks uses each block's rate for its own days.
| Invoice | Fixed sum | Interest at 30 days | Total added at 30 days | Total added at 60 days | Total added at 90 days |
|---|---|---|---|---|---|
| £650 | £40 | £6.28 | £46.28 | £52.55 | £58.83 |
| £4,800 | £70 | £46.36 | £116.36 | £162.71 | £209.07 |
| £12,000 | £100 | £115.89 | £215.89 | £331.78 | £447.67 |
On small invoices the fixed sum is most of the money, and it is per invoice: ten late £650 invoices owe £400 in fixed sums before any interest. On a £12,000 invoice the interest is what grows, at roughly £4 a day.
Whether to charge per invoice or on the whole balance is covered in how to charge interest on overdue invoices.
UK statutory interest calculator
Enter your invoice, the current Bank of England base rate, and the days late. Loads with the £12,000 row from the table above.
Formula: invoice × (8% + base rate) ÷ 365 × days late, plus £40 under £1,000, £70 from £1,000, £100 from £10,000. Simple interest at one rate; an invoice spanning a six-month rate change uses each period's rate for its own days. General information, not legal advice.
Can you legally charge a late payment fee in the UK
Yes, for business-to-business invoices. The Late Payment of Commercial Debts (Interest) Act 1998 gives every UK business the right to statutory interest and a fixed compensation sum on a late commercial debt, with no clause needed in the contract.
The rules in short, with the ones that most often go wrong first.
- Rate. 8% per annum above the Bank of England base rate (gov.uk). Do not charge more than that under the statutory route.
- Start date. The day after the agreed due date, and a single day past it already counts as late under the Act.
- Fixed sum. £40, £70, or £100 per invoice by invoice size, claimable once per invoice, on top of interest.
- Notice. None required. Interest accrues automatically. Stating it on the invoice and the reminder is what makes it work in practice.
- Consumers. The Act covers commercial debts only. Invoices to private individuals fall under consumer law instead.
Full rate and eligibility detail, including the six-year limitation period, public-authority terms and the consumer carve-out: late payment fees in the UK. If you supply goods on trade terms, the guide to charging interest on overdue invoices covers the fixed sum per delivery and why one aged debtors report can carry two statutory rates.
Xero has no native late fee or interest feature, so the charge is raised as a separate invoice or a line on a statement. Xero's own ideas board request for interest on late invoices has been open since 29 March 2012 and is still gathering votes: 1,112 on 14 September 2026 and 1,114 on 28 September 2026. Xero's latest response, 7 July 2025, states there are no committed plans. How to add one anyway: adding late payment fees in Xero.
Why the first reminder goes out the day after the due date
Because the customer's accounts team pays the suppliers who ask, in the order they ask.
A due date is only a due date if something changes when it passes. Three things should change on day one: a reminder arrives, the interest clock is running and the reminder says so, and the invoice is in your overdue list with a next action.
The cadence most guidance converges on is four to six touches: pre-due, due date, then around 3, 7, 14, and 30 days overdue. Xero's built-in reminders cover the email part, up to five per organisation with three on by default, but they send the same reminder to every customer and cannot send SMS or a scheduled statement.
For the schedule to hold across a hundred customers it has to be automated, and it has to escalate: accounts@ on the due date, a named credit controller at 7 to 14 days, a director at 21 days and on the late fee. The day-by-day version, with what to do at 30, 60 and 90 days, is the invoice escalation ladder.
Do not pause the ladder for a customer you like. It works because it is the same for everyone. A customer with a genuine reason goes on a payment plan with dates, with interest running until the plan is agreed in writing.
What happens if an invoice is not paid after 30 days
At 30 days overdue the debt has typically accrued a month of statutory interest plus the fixed sum, and it is time to send the Letter of Claim. From that letter the customer has 30 days to respond before you can file a claim.
The DSO calculation shows how much cash a 30-day slip ties up. On the UK average of 8.3 days late, a business turning over £1m has around £23,000 sitting past due at any moment. What to do at 30 days, as a list:
- Confirm the invoice is not disputed. If it is, resolve the dispute first; a Letter of Claim on a disputed invoice wastes the 30 days.
- Send a final statement showing the invoice, the interest to date, and the fixed sum as one balance.
- Post the Letter of Claim under the Pre-Action Protocol, with the prescribed information. Email a copy as well.
- Diary day 60. If there is no response or plan, decide between an agency (Credit Services Association member), the small claims track (up to £10,000; online money claims up to £25,000), or, against a larger customer, the Small Business Commissioner.
- Stop new work for that customer until the balance is cleared or a plan is signed.
What happens next if the customer still ignores you: your customer is ignoring invoice reminders: what to do next.
What mistakes cost you when customers pay late?
Three mistakes cost you days or the debt.
Sending a Letter of Claim on a disputed invoice. The customer gets 30 days to respond under the Pre-Action Protocol for Debt Claims. A dispute is still open at the end of it.
Fix: settle the dispute in writing first.
Skipping the day-one reminder. On the day an overdue reminder goes out, about 12 in 100 of those invoices get paid. With no reminder, only about 4 in 100 do. Source: our analysis of invoice data from over 1,000 Paidnice customers. See our reminder data.
Fix: send it the day after the due date.
Waiting until day 30. Of invoices 7 days overdue, 1 in 5 is still unpaid 180 days after the due date. At 30 days overdue it is 2 in 5, and at 90 days 3 in 4.
Fix: phone at day 14 to 21.
Source: our analysis of invoice data from over 1,000 Paidnice customers. See when an overdue invoice becomes bad debt.
Five kinds of late-paying customer and what works on each
Late payers are not one problem. The forgetful need a reminder, the process-blocked need a PO number, the stretched need a plan, the disputer needs an answer in writing, and the deliberate late payer needs a cost.
To sort a particular unpaid invoice into one of these, see customer not paying an invoice: dispute, delay or cash problem.
| Type | How you spot them | What works | What wastes your time |
|---|---|---|---|
| The forgetful | Pays within a day of every reminder, never argues | Pre-due reminder plus a day-one reminder with a payment link; keep them on standard terms | Phone calls, late fees applied without warning |
| The process-blocked | "It's with approvals", asks for a PO number or a supplier form after the due date | Get the PO and the AP contact before invoicing; send the invoice to accounts@ and the buyer both; a statement, because AP reconciles to statements | Chasing the buyer, who does not run the payment run |
| The stretched | Part-payments, round numbers, "can we do it at month end" | A written payment plan with dates and auto-pay; interest keeps accruing until the plan is signed; stop new credit until caught up | Extending terms informally, which resets nothing |
| The disputer | Silence until chased, then a query about the work or the amount | Pause fees on the disputed invoice only, answer in writing within 48 hours, and issue a credit note or a confirmation; then the ladder resumes | Letting one queried line hold the whole invoice |
| The deliberate | Pays every supplier at 60 to 90 days as policy, regardless of terms | Interest and the fixed sum on every invoice from day one, statements monthly, the Letter of Claim on schedule; price the delay into the next quote or decline the work | Goodwill, discounts, and hoping the next invoice will be different |
The deliberate late payer is the one the ladder is built for. A business that pays at 90 days as policy is borrowing from you at 0%. The statutory rate makes that loan cost base rate plus 8%, and the fixed sum makes small invoices expensive to hold.
Which late payment lever fits your business?
The ladder is the same for every customer. The lever you hold on top of it depends on what you sell.
| Your business | Start with | Watch out for |
|---|---|---|
| Construction trades | Reminders before and after each claim's due date, then, if you may suspend, a notice of intention to suspend work (our recommendation). | In England, Wales and Scotland, if the Act covers your contract, you may suspend for non-payment only after at least seven days' notice of your intention and the grounds (Construction Act 1996, s112). Some contracts, such as those with a residential occupier, are outside it, so check yours. |
| Equipment hire | Reminders the day a cycle invoice falls due, while the gear is still on rent. | Gear still out on an unpaid account. Decide before the hire who can stop new hires (our recommendation). |
| Transport and logistics | A soft reminder and a monthly statement for anchor shippers, the full ladder for small accounts. | One disputed fuel surcharge or detention charge. Pull that invoice out and keep chasing the rest. |
| Accounting firms | Interest set by your engagement letter, shown on the overdue fee statement. | A client who is a private individual. The UK 1998 Act covers business debts, so your engagement letter is the more likely basis for interest. |
How to stop the same customers paying late every month
Fix the terms before the invoice, automate the ladder after it, and review the aged receivables once a month for customers drifting from one type to another. These three steps stop repeat late payment.
- Put the terms on every document. Due date, the statutory interest statement, the fixed sum, and the escalation path, on the quote, the contract, and the invoice.
- Automate the first three rungs. Reminders on a schedule, interest and the fixed sum posted to the ledger, statements sent monthly with the balance recalculated at send. Escalation to a named person at 14 and 21 days. Nothing on the ladder should depend on someone remembering.
- Review the aged receivables monthly. Move customers between groups as their behaviour changes; a forgetful customer who becomes a stretched one needs a plan, not another reminder. Track your average wait for payment so you can see whether the ladder is working.
Treat a late payment as a warning. After an on-time payment, a customer pays the next invoice on time about 8 times in 10. After a payment just 1 to 7 days late, that falls to about 3 in 10.
The full process is in 12 steps to better accounts receivable, and the tools that run it on Xero are compared in credit control software for Xero. On Xero and QuickBooks Online, Paidnice runs the first three rungs from the ledger:
- Reminders by email and SMS on a schedule per customer group, escalating to a named person.
- Late fees and interest posted to the ledger, with a Bank of England base rate toggle that applies the correct rate for each period the invoice spans.
- Statements sent monthly, with interest recalculated at the moment of sending.
- Fixed sums as a separate line item with its own description and income account, which is how the £40, £70, and £100 compensation is applied.
Customers see half as many late invoices in the first 30 days. The UK Essentials plan is £49 a month for up to 150 invoices.
Paidnice features in this article
About the editorial team
Denym started Paidnice in 2022 after customers paying late left his own business short on payroll. He has led it to $1 billion collected on time across more than 1 million invoices, and writes about credit control, late fees and getting paid on Xero and QuickBooks.
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