Customer Not Paying an Invoice? What to Do Next

A customer not paying invoice 60 or 90 days after the due date is rarely about the money not existing. The work was signed off without complaint, the funds are usually sitting in their account, and your name has simply slipped down the payment run behind creditors making more noise than you.

What you do over the following fortnight decides whether you collect in full or write it off. Below we set out how to work out what you are actually dealing with, what you can legitimately add to unpaid invoices, when to take legal action for non payment, and the point at which chasing it yourself stops achieving anything.

Why Customers Do Not Pay

Every non paying account falls into one of three categories, and handling all three the same way is what costs suppliers money every year.

Administrative failure accounts for more unpaid invoices than most people would believe. A missing purchase order number, the invoice landing in a personal inbox instead of accounts payable, VAT applied incorrectly, or a supplier portal upload that failed without telling anybody. A single call to the named finance contact usually clears it within a day.

Genuine cash shortage presents differently. The customer answers your call, apologises and asks for time, which is entirely workable provided you secure a written instalment arrangement and a first payment while you still have them on the phone.

Deliberate avoidance has a signature of its own. Payment promised “next week” and never made, calls diverted to voicemail, and a dispute raised for the first time only once you start applying pressure. From that point, further letters from you carry no weight whatsoever.

Telling the Can’t Pays From the Won’t Pays

The distinction matters because it changes your entire strategy. A customer who cannot pay needs a structured arrangement and close monitoring, and pushing them into insolvency proceedings usually leaves you with nothing.

A customer who will not pay needs consequences with dates attached. Any leniency you extend gets read as confirmation that your terms are negotiable, and the account will still be outstanding in six months.

Behaviour tells you which one you have. Someone in genuine difficulty stays contactable and offers something, however small. Someone avoiding payment goes quiet, then reappears with a complaint about work they accepted months earlier.

What To Do When a Customer Will Not Pay Their Invoice

Begin by confirming the debt is undisputed and correctly raised. Check the invoice was addressed to the right legal entity rather than a trading name, that the reference and delivery details match the original order, and that nobody on your team quietly agreed extended terms over the phone.

Ten minutes at Companies House is time well spent. Overdue accounts, a recent change of registered office, a proposal to strike off or a sudden change of directors all tell you that speed matters far more than diplomacy on this particular file.

Then assemble the paperwork properly. The accepted quote or signed order, proof of delivery or sign off, your terms and conditions, and every reminder you have sent with dates. That file is what determines whether the debt is genuinely recoverable or merely arguable.

The Chasing Sequence That Works

Escalation only works when it has firm dates behind it, otherwise a customer paying late gradually becomes a customer not paying at all. We work to a straightforward timetable and recommend the same to clients running credit control in house.

Telephone the finance contact directly at 7 days past due and get a specific payment date, not a vague reassurance that it is “in the system”. Follow up in writing at 21 days quoting the invoice number, the balance and the interest now accruing daily.

Issue a final demand at 45 days stating plainly that the account will be placed for external collection if payment is not received within 7 days. Then place it at day 60, because a threat you do not act on teaches your customer exactly how seriously to treat your terms in future.

Getting the Phone Calls Right

Most recoveries are won on the telephone rather than in writing, and the difference between a collected account and a stalled one is often who you speak to. Accounts payable clerks process what they are told to process, so escalate to the finance director or owner once a promise has been broken.

Never accept “we will look into it” as an outcome. Ask for the payment date, the amount going out and the method, then confirm all three by email the same afternoon so there is a written record.

Stay professional throughout, however frustrated you are. Aggression hands a debtor an excuse to raise a complaint and reframe the conversation around your conduct instead of their unpaid invoices.

What You Can Add To Unpaid Invoices

On business to business debts you are entitled to statutory interest at 8% above the Bank of England base rate, calculated daily from the day after payment fell due. That entitlement applies even where your contract makes no mention of interest at all.

You can also claim fixed compensation of £40, £70 or £100 depending on the size of the debt, plus reasonable recovery costs where your terms provide for them. Applied to a £15,000 invoice six months overdue, the additional figure is substantial enough for a finance director to take notice.

Consumer debts work on a different basis and only carry interest where your written terms specifically allow it, so check the agreement before you add anything to the balance.

Commercial Leverage Beyond Interest

Contractual pressure frequently recovers money faster than statutory interest ever will. Placing the credit account on stop, suspending further deliveries or site attendance, and withholding certificates, drawings or software access all tend to move an account up the payment run within days.

Retention of title clauses are worth checking on unpaid goods, particularly where stock remains identifiable and unsold. Where you hold a personal guarantee from a director, that becomes another route entirely if the company itself proves unwilling.

Apply any of this in line with your contract rather than on instinct. Suspending supply without a contractual right to do so hands the debtor a counterclaim and weakens an otherwise straightforward case.

When To Take Legal Action For Non Payment

Court is a tool rather than a default position, because it is slower and more expensive than most people assume and it ends the trading relationship outright.

Before issuing any claim, a Letter Before Action from a third party gives the debtor a defined consequence and a short deadline. A considerable proportion of accounts settle at exactly this stage, purely because the demand no longer comes from the supplier they have spent three months ignoring.

Where litigation is genuinely warranted, the route depends on the debt itself. Money Claim Online suits smaller undisputed sums, a statutory demand followed by winding up proceedings carries real weight against a solvent limited company, and disputed contracts need properly drafted particulars of claim from the outset.

Judgment is not the end of the process. Enforcement through High Court Enforcement Officers, a third party debt order against the debtor’s bank account, or a charging order over property is where money is actually recovered, and none of it works against a company holding no assets.

Watch the Limitation Period

Contract debts in most cases become unenforceable six years after the cause of action arose. Plenty of otherwise sound claims are lost because an invoice sat in a drawer while the owner hoped the customer would come good.

Any written acknowledgement of the debt or part payment restarts that clock, which is one practical reason to get every promise confirmed in writing. Even so, waiting years before acting reduces your prospects enormously.

Older accounts are harder because witnesses leave, records are archived and the debtor’s circumstances change. If a debt has been outstanding for more than a year, treat it as urgent rather than routine.

Recovering the Debt Without Losing the Customer

Plenty of clients hold back from instructing an agency because the account is otherwise valuable and they do not want it handled clumsily. That concern is entirely reasonable, and it shapes the way we approach every case we take on.

Our collections are conducted discreetly and professionally, with no pressure tactics and no public escalation. The trading relationship survives far more often than people expect, because the customer knows perfectly well the money was owed and the request has simply arrived from someone with a clear next step behind it.

Where the relationship cannot be salvaged, the priority shifts to recovering the full balance along with interest and our fees. To discuss an unpaid account and the most sensible route forward, call our New Business Team on 0333 043 4425.

Stopping It Happening Again

Most repeat exposure traces back to weak onboarding rather than bad luck. Credit checking new accounts, setting sensible limits, taking a signed order confirming your terms and recording who is authorised to place orders removes a great deal of future argument.

Invoice promptly and precisely, with the correct purchase order number and the entity name that appears at Companies House. Small clerical errors are the most common reason a payment run skips over an otherwise valid invoice.

Then apply your escalation timetable consistently across every customer, including the large ones. Debtors quickly learn which suppliers follow through and which ones can be left until last.

Frequently Asked Questions

How long should I wait before escalating an unpaid invoice?

Sixty days past the due date is where recovery rates start dropping noticeably. Accounts placed with us within that window settle far more often than those handed over at nine or twelve months, because the funds are still available and the paperwork is fresh in everybody’s mind.

Can I charge interest if my terms do not mention it?

Commercial debts attract statutory interest and fixed compensation automatically under late payment legislation, regardless of what your contract says. Consumer debts are treated differently and only carry interest where your written terms specifically provide for it.

What if the customer raises a dispute after I chase them?

Genuine disputes need resolving on the evidence, so check your delivery records, sign off documents and correspondence first. A complaint that surfaces for the first time only after repeated chasing is usually a delaying tactic, and it rarely survives contact with a properly documented file.