Customers keep paying invoices late: what to do, in order

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If customers keep paying late, act in this order: chase the day after the due date, add statutory interest at 8% plus base rate and the £40 to £100 fixed sum, send a Letter of Claim at 30 days, then choose an agency or small claims.

Automate the first three steps so they happen without you. 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 29.3 days, 8.3 days past due. One late payment is normal. The same customer late every month is a process gap.

The order 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.

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.

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 software like Paidnice does on Xero and QuickBooks Online.

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.

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.

Late fees are leverage. The number on the statement goes up every day, the customer's bookkeeper can see it, and the invoice with a visible, growing charge is the one that moves to the top of the payment run. Detail on rates and the Act: late payment fees in the UK.

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. Do not charge more than that under the statutory route.
• Start date. The day after the agreed due date. Agreed terms must usually be within 60 days between businesses (30 for public authorities); if no date was agreed, payment is late 30 days after the customer gets the invoice or you deliver, whichever is later (gov.uk).
• 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.
• Limit. Six years from the date the debt fell due to bring a claim in England and Wales (Limitation Act 1980 s5); Northern Ireland is also six years, under the Limitation (Northern Ireland) Order 1989.
• Consumers. The Act covers commercial debts. Invoices to private individuals fall under consumer law instead, so take advice before charging a fee to a consumer.

Xero has no native late fee or interest feature, so the charge is raised as a separate invoice or a line on a statement. Its own ideas board request for interest on late invoices has been open since 29 March 2012 with 1,112 votes, and Xero's latest response, 7 July 2025, describes it as early days. 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. Waiting a week signals the due date was a suggestion. Practitioners commonly advise chasing the day after the invoice falls due.

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. None of these are rude. A next-day reminder with the invoice attached is routine for any bookkeeper.

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.

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.

Thirty days is also where your own numbers change. 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:

1. 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.
2. Send a final statement showing the invoice, the interest to date, and the fixed sum as one balance.
3. Post the Letter of Claim under the Pre-Action Protocol, with the prescribed information. Email a copy as well.
4. 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.
5. 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.

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.

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. Most stop, because your invoice is now the expensive one in the pile.

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.

1. 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.
2. 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.
3. 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.

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 cut their average wait for payment in half, within 30 days. The UK Essentials plan is £49 a month for up to 150 invoices.