How to reduce late payments
Updated 28 June 2026
Late payment is rarely about one thing. The businesses that get paid on time tend to do several small things consistently. These seven steps target the most common causes of overdue invoices.
1. Put your terms in writing
Agree written, signed payment terms before you start work. Clear terms remove the most common excuse for late payment and make any later dispute far easier to resolve.
2. Invoice promptly and correctly
Send invoices immediately, with a clear due date, a purchase-order reference where required, and the exact details your customer's accounts team needs. A missing PO number is a frequent, avoidable cause of delay.
3. Credit-check new customers
Check the creditworthiness of significant new B2B customers before extending credit. It is far cheaper to set the right terms up front than to chase a bad debt later.
4. Offer shorter terms — and mean them
Default to shorter terms (for example 14 or 30 days) rather than 60 or 90. Longer terms quietly transfer your working-capital risk onto your own business.
5. Use deposits and milestones
For larger jobs, take a deposit and bill against milestones rather than a single invoice at the end. This limits how much is ever outstanding at once.
6. Automate reminders and charge statutory interest
Send polite reminders before and after the due date, and be prepared to charge the statutory interest and compensation you are entitled to. The willingness to claim it changes behaviour — see our guide to statutory interest.
7. Reduce customer concentration
If one client is a large share of your revenue, a single late payment becomes a crisis. Broadening your customer base is one of the most effective long-term protections against late-payment risk.
Frequently asked questions
What are the best payment terms for a small business?
Shorter is generally safer. Many SMEs default to 14 or 30 days, use deposits and milestones for larger jobs, and avoid 60–90 day terms that transfer working-capital risk onto themselves.
Should I charge interest on late invoices?
Being willing to charge the statutory interest and compensation you are owed tends to improve payment behaviour. See our guide to UK statutory interest on late payments.
How do I check a customer's creditworthiness?
Use a commercial credit-checking service for significant new B2B customers, and set credit limits and terms accordingly before you start work.
Sources
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