Late or unpaid invoices are one of the most common challenges faced by businesses across England and Wales. Whether you are a sole trader, SME or established company, unpaid invoices can disrupt cash flow, strain operations and, in some cases, threaten the viability of your business.
Understanding your legal position and the practical steps you can take is essential. This guide outlines what you should do if a client has not paid your invoice, and how to recover what you are owed effectively and lawfully.
Check Your Contract and Payment Terms
Before taking any action, the first step is to review the terms agreed with your client. Your contract or terms and conditions will determine your rights and the remedies available to you.
Key points to check include:
- The agreed payment deadline (for example, 14 or 30 days)
- Any clauses relating to late payment interest or charges
- Whether there are dispute resolution provisions
- The scope of the services or goods provided
If you do not have a formal written contract, the agreed terms may still be enforceable based on email exchanges, quotations or conduct. Under English law, a binding contract can exist even without a signed document, provided there is offer, acceptance, consideration and intention to create legal relations.
If payment terms are not clearly defined, the law may imply a reasonable timeframe for payment. In business-to-business transactions, this is often considered to be 30 days unless otherwise agreed.
Take Practical Steps to Recover Payment
Once you have confirmed that payment is overdue, it is important to act promptly but proportionately. Many disputes can be resolved without formal legal action.
Start with clear and professional communication. In many cases, non-payment is due to oversight or temporary cash flow issues.
Consider the following approach:
- Send a polite reminder shortly after the due date
- Follow up with a more formal reminder if payment is still outstanding
- Contact the client directly by phone where appropriate
- Reissue the invoice with clear payment details
- Keep a record of all communications
If the client raises a dispute about the invoice, you should address it quickly and attempt to resolve the issue. Ignoring a dispute can delay recovery and weaken your position later.
In some cases, offering a short payment plan may be commercially sensible, particularly if you wish to preserve the business relationship.
Understand Your Legal Rights
If informal steps do not result in payment, you may have legal remedies available under the law of England and Wales.
For business-to-business transactions, the Late Payment of Commercial Debts (Interest) Act 1998 allows you to claim:
- Statutory interest at 8 percent above the Bank of England base rate
- Fixed compensation (ranging from £40 to £100 depending on the debt value)
- Reasonable costs of recovering the debt
You may also have a contractual right to charge interest if this is included in your terms.
Where payment remains outstanding, you can consider formal recovery options. These may include:
- Sending a Letter Before Action in compliance with the relevant pre-action protocol
- Issuing a claim in the County Court (often via the Money Claim Online service)
- In certain cases, serving a statutory demand where the debt exceeds £750
It is important to ensure that the debt is undisputed before taking more serious steps such as a statutory demand, as misuse of insolvency procedures can have consequences.
Court proceedings can result in a judgment in your favour, but enforcement may still be required if the debtor does not pay voluntarily.
Prevent Future Non-Payment
While recovering unpaid invoices is important, prevention is equally critical for long-term business stability.
You can reduce the risk of non-payment by putting robust processes in place from the outset. This includes clear contracts, well-defined payment terms and proactive credit control.
Consider the following measures:
- Use written terms and conditions for all clients
- Request deposits or staged payments for larger projects
- Carry out basic credit checks on new clients
- Issue invoices promptly and accurately
- Include clear consequences for late payment
Consistency is key. Businesses that enforce their terms consistently are less likely to encounter persistent payment issues.
Speak to a Commercial Solicitor
Unpaid invoices can escalate quickly, particularly where there are disputes or large sums involved. Taking early legal advice can help you recover your money efficiently and avoid unnecessary costs.
At Penerley, we regularly advise businesses across England and Wales on debt recovery, contract enforcement and commercial disputes. We can assist with drafting effective letters before action, negotiating settlements and pursuing court proceedings where necessary.
If you are dealing with a client who has not paid your invoice, contact our commercial team today to discuss your options and take the next step towards recovery.
