How to Recover Unpaid Invoices: A UK Business Guide

Late payment is one of the biggest threats to a small business's cash flow. Here's a calm, escalating process for getting paid what you're owed.

Step 1: Send a polite reminder

Most late payments are oversights. A friendly reminder around the due date, restating the invoice details and how to pay, resolves many cases without any friction.

Step 2: Send a firmer chase

If the reminder goes unanswered, follow up more firmly. Reference the previous reminder, set a clear new deadline, and note that you may add interest and pursue the debt further.

Step 3: Claim interest and compensation

For most commercial debts, you can claim statutory interest and a fixed compensation sum on late payment under the Late Payment of Commercial Debts legislation. Mentioning this often prompts payment.

Step 4: Send a letter before action

This is the formal step before court. For debts owed by individuals or sole traders, it must follow the Pre-Action Protocol for Debt Claims, giving specific information and usually 30 days to respond.

Step 5: Court action

If the debt is still unpaid, you can issue a claim, often through the online Money Claim service for straightforward sums. For larger undisputed debts, a statutory demand may be an alternative route.

• Payment reminder — gentle first nudge
• Final demand — firm escalation
• Letter before action — formal pre-court step
• Court claim or statutory demand — formal recovery

Frequently asked questions

How much statutory interest can I charge on a late commercial payment?

Under the Late Payment of Commercial Debts (Interest) Act 1998, you can typically charge interest at the Bank of England base rate plus 8%, on top of a fixed compensation sum that scales with the debt size.

Is there a time limit for chasing an unpaid invoice through the courts?

Generally six years from when the debt became due, under the Limitation Act 1980 — after that the debt is usually 'statute-barred' and court action isn't possible, so don't leave it too long.