How to Handle Overdue Payments from Clients

Late payments can drain your patience and your bank account faster than anything else in business.

30-Second Summary

Late payments can crush cashflow, hurt trust, and waste time chasing clients. The solution starts with setting clear terms, spotting early warning signs, and keeping communication professional but firm. By using contracts, reminders, payment plans, legal options, and smart tools such as the best accounting software UK businesses use, you can stay in control. 

Support from London accountants, accounting firms in Cambridge, and even auditors in Cambridge makes the process smoother. This guide shows you step-by-step how to protect your business and keep money flowing without losing clients.

Why Clients Delay Payments

Common Excuses Clients Give

From my own work with small business owners, I’ve heard every excuse under the sun:

• “The invoice got lost in the system.”
  
  

• “We’re waiting for a big client to pay us first.”
  
  

• “Can we sort this next month?”
  
  

The problem is that small excuses often turn into big delays. A 2023 report from the Federation of Small Businesses showed that around 52% of small businesses in the UK suffered from late payments. That means more than half of us are left chasing money we’ve already earned.

How Cashflow Struggles Affect Businesses

When money doesn’t come in on time, bills still need paying. Staff need wages. Suppliers don’t wait. For many businesses, one unpaid invoice can trigger a chain reaction. I’ve seen business owners rely on personal savings or credit cards just to keep afloat because a client delayed paying by two months. That’s not sustainable.

Spotting the Red Flags Early

Warning Signs Before Invoices Go Overdue

You can usually sense trouble before it happens. A few signs I look for include:

• Clients who haggle aggressively on price at the start.
  
  

• Slow replies to emails and calls.
  
  

• Past behaviour—if they’ve been late before, they’ll likely do it again.
  
  

Trust your gut. If you feel like a client may drag their feet, you’re probably right.

Building Better Payment Terms

One of the smartest ways to protect yourself is by tightening payment terms upfront. Instead of giving 60 days, why not 14 or 30 days? I’ve had far fewer issues since switching most clients to 14-day terms with late payment fees clearly written in. Some UK businesses also take a deposit—usually 25% to 50%—before starting any work. This ensures you’re never completely out of pocket.

Setting Up Clear Agreements

Contracts That Protect You

I learned early in my career that a handshake isn’t enough. Every project now starts with a written contract. It doesn’t need to be complicated, but it must include:

• The amount agreed.
  
  

• The payment terms.
  
  

• The deadline.
  
  

• What happens if payment is late.
  
  

A clear contract isn’t just about being strict—it gives you backup if things go wrong. Courts and debt collectors take you far more seriously if you’ve got everything in writing.

Using Accounting Software for Reminders

One thing that’s helped me massively is using the best accounting software UK businesses trust. Tools like Xero, QuickBooks, and Sage send automatic reminders before and after the due date. Clients get a nudge without me having to sit there writing emails. It’s professional, consistent, and saves me hours every month.

Talking to Clients About Late Payments

How to Stay Professional and Firm

The trick is to be polite but not weak. I usually follow this order:

1. A gentle reminder email the day after the invoice is due.
   
   

2. A firmer reminder a week later.
   
   

3. A phone call if nothing happens after two weeks.
   
   

When I pick up the phone, I always say something like:
“Hi, I just wanted to check—our invoice dated 5th July for £1,200 hasn’t cleared yet. Can you let me know when I can expect the payment?”

It’s direct, not rude. Most clients respond quickly when you make it personal.

Scripts You Can Use to Ask for Payment

If you’re not sure what to say, here are a few phrases that work:

• “We noticed payment hasn’t come through yet. Could you confirm when it’ll be processed?”
  
  

• “I just wanted to make sure there wasn’t an issue with the invoice we sent on [date].”
  
  

• “As per our agreement, the payment was due on [date]. Can you let me know when we’ll receive it?”
  
  

These lines keep the pressure on without burning bridges.

Payment Plans and Compromises

When Instalments Make Sense

Not every client refuses to pay on purpose. Sometimes they’re genuinely struggling. If that’s the case, offering a short-term instalment plan can save the relationship. For example, I once had a client who owed £3,000 but couldn’t pay it in one go. We agreed on three payments of £1,000 over three months. It wasn’t ideal, but I got my money and kept the client.

Avoiding Risky Arrangements

Be careful though. Never let instalments stretch too long. Anything over three months usually means the client is in real trouble, and you may never see the full amount. Always get instalment plans in writing and include dates.

Legal Options if Clients Still Don’t Pay

Sending a Formal Letter Before Action

If reminders and calls don’t work, the next step is a Letter Before Action (LBA). This is a formal warning stating that if the payment isn’t made by a certain date, you’ll take legal steps. Often, this alone pushes clients to pay because they know you’re serious.

When to Call in Debt Collectors or Solicitors

If that fails, you may need outside help. Debt collectors charge a fee or a percentage of what they recover. Solicitors can issue court claims on your behalf. According to UK law, you’re entitled to claim interest and compensation on late commercial payments. While I’ve only had to use this route once, just knowing the law is on your side gives you confidence.

How Accounting Firms Can Support You

London Accountants and Their Role

Many London accountants I’ve worked with go beyond filing taxes. They help set up invoicing systems, track overdue payments, and even chase clients directly. For small business owners, this can be a huge relief.

Accounting Firms in Cambridge Offering Debt Control

Some accounting firms in Cambridge specialise in cashflow management. They not only prepare accounts but also offer credit control services—meaning they’ll follow up with late payers so you don’t have to.

Auditors in Cambridge for Stronger Financial Checks

When it comes to bigger contracts, working with auditors in Cambridge ensures your clients are financially stable before you sign any deals. I know one company that lost thousands because they didn’t check a client’s books first. Auditors provide that extra level of security.

Tools That Make Chasing Payments Easier

Best Accounting Software UK Businesses Trust

The right software can cut your stress in half. The best accounting software UK companies use often includes:

• Automatic invoice generation.
  
  

• Payment reminders.
  
  

• Direct links with banks.
  
  

• Reports showing which clients are always late.
  
  

Personally, I use QuickBooks. Since switching, overdue invoices have dropped by about 40% because the system keeps everything organised.

Setting Up Automated Systems

Automation is your friend. Instead of chasing each client manually, set up:

• Email reminders.
  
  

• Text alerts.
  
  

• Online payment options (card or PayPal).
  
  

Clients are far more likely to pay quickly when it’s easy for them.

Protecting Yourself for the Future

Building Stronger Client Vetting Processes

Prevention beats cure. Before taking on a new client, I always:

• Check reviews online.
  
  

• Ask for references.
  
  

• Do a credit check if the project is large.
  
  

These steps may feel tedious, but they’ve saved me from signing with high-risk clients.

Keeping Cashflow Healthy

To stay safe, always keep a cash buffer in your account. Aim for at least three months of expenses saved up. That way, if one or two clients pay late, your business doesn’t grind to a halt. Some owners also use invoice factoring—selling unpaid invoices to a finance company in return for instant cash.

Final Thoughts

Chasing overdue payments is never fun, but it’s part of running a business. The key is to act early, stay professional, and use every tool at your disposal. Contracts, reminders, and software make a huge difference. Support from London accountants, accounting firms in Cambridge, and auditors in Cambridge adds another layer of protection.

If late payments have been stressing you out, start by tightening your payment terms and setting up an automated reminder system. Trust me—it’ll save you sleepless nights and keep your cashflow strong.