Running a business is not always easy. There can be a lot of red tape and admin and not enough time to actually do the work. This is often made worse by clients who are reluctant or slow payers.

This type of client are not only frustrating but can cause problems with cash flow and be an unnecessary drain on your time, stopping you working for others who WILL pay on time.

Start with a contract
First off, to avoid running into difficulties further down the line – ensure you have a contract in place that covers payment terms, a policy on late fees, interest and agreed conditions. Unfortunately, disputes can occur at any time in business, but having clearly defined terms and conditions can ensure you are more protected, if and when a dispute occurs.

Invoice on time and at regular intervals
Ensure that invoices are sent on time, records are made and reminders are sent at regular intervals up to the payment term. Note the payment terms clearly on the invoice to ensure the client is aware of when the bill is due.

Act quickly
When your invoice goes unpaid, make sure to follow up promptly. An unpaid invoice may be a simple oversight – a quick email might fix it, or perhaps you need to speak to someone else and a polite reminder is all it takes to find a solution.

What’s more, there is a time limit on collecting the money you’re owed. Generally, for contractual debt, there is a statutory limitation period of 6 years which runs from the date the payment is due.

Stop the work
If the payment is part of an ongoing project or similar and you require payment for say the first half and this payment is being withheld – if noted in your terms and conditions, stop any further work until payment has been made. 

Charge interest
When a client is late in paying, you are legally entitled to charge interest known as ‘statutory interest’, unless you have a contractual entitlement to charge interest in which case the contract will take precedence. Statutory interest is 8% plus the Bank of England base rate for business-to-business transactions. If you decide to add interest on a late commercial payment, you should send a new invoice as best practice.

Letter before action
A letter before action is the last piece of correspondence you’re likely to send the client before any legal proceedings begin. This highlights to them that they have until a certain deadline to settle any debts with you before you begin pursuing legal action against them to claim the money you’re owed.

Legal advice
PGM can advise on the best course of action to take based on your case. We can chase the debt for you and free up your time to enable you to do what you do best – run your business.

For further guidance and advice, please contact us on 01792 468684 or email

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