You’ve delivered on your work, set your payment terms and sent an invoice to your client. But the payment’s overdue, and you haven’t received a response or update. You’re not alone…
In 2020, our research showed that the average UK SME was chasing five outstanding invoices at any one time, totalling an average of £8,500. And things haven’t got any better since – in 2025, UK businesses were owed a total of £26 billion in late payments (around £17,000 on average).
Dealing with outstanding invoices can be frustrating, but there’s no need to panic. There are several ways to manage an overdue invoice, no matter the state of your client relationship.
In this article, we’ll explain how to get your invoices paid without burning client relationships, and how you might prevent them from becoming overdue in the future.
In a nutshell: Overdue invoices can cause cash flow issues if they remain unpaid. You can try preventing late payments by setting clear terms upfront and sending automated reminders. If an invoice does become overdue, start with friendly follow-ups, then escalate to formal demands or legal action if necessary. Under UK law, you’re entitled to add the Bank of England base rate plus 8% and fixed compensation (£40-100 depending on the debt size) to any overdue invoice.
How do overdue invoices affect UK businesses?
It’s estimated that late payments cost the UK economy ��11 billion per year, with around 38 businesses closing their doors each day because of this issue. It’s easy to understand why:
Late payments disrupt cash flow
They create unnecessary financial strain
They limit your ability to invest, grow, or even pay your own bills on time
Being owed money is frustrating and can be stressful, particularly for small businesses and the self-employed. But you don’t have to suffer in silence. UK law protects small businesses from unfair payment delays, and there’s plenty you can do to mitigate the impact.
How can invoice finance help protect your cash flow?
Invoice finance helps you turn unpaid invoices into immediate working capital, plugging the cash flow gaps that can be caused by overdue invoices. Providers can advance up to 95% of an invoice’s value, boosting your cash flow without having to rely on overdrafts or loans.
Tide has access to a panel of Invoice Finance lenders who can help you release the cash tied up in your unpaid invoices.
So instead of waiting for your customers to pay, you can assign your unpaid invoices to an invoice finance provider. This way you’re able to access a percentage of the money owed to you straight away, instead of waiting the full payment term.
If you’re a Tide member, you can apply for invoice finance directly from the Tide app (available on Apple App Store and Google Play Store).
How to prevent overdue invoices
Set expectations
To ensure overdue invoices are paid, set clear expectations from the start of your client relationships. Outline your payment terms in your first proposal and review them during onboarding, so there are no surprises when signing contracts.
Be sure to cover:
How and when you send invoices
How clients can pay you
Your payment terms (eg NET 15)
It also pays to double-check your invoices for accuracy. Incorrect details can lead to delays or disputes, so check amounts, dates, and payment information before you send them.
Charge interest
You can also deter late payments by including interest terms in your agreement. Under the Late Payment of Commercial Debts (Interest) Act 1998, you can charge up to 8% interest on overdue invoices – for example, with a £1,000 invoice overdue by 50 days at a 0.5% interest rate, interest totals about £11.50. Just make sure clients are aware of this upfront.
Automate reminder emails
Make sure to have your ‘accounting house’ in order, too. It can be hard to keep track if you’re constantly creating invoices manually and sending them via email every time. Instead, use an intelligent business account with integrated invoicing (such as Tide's invoicing feature).
Top tip: To see a list of the key features that an invoicing software solution should include, as well as our picks for the best solutions available on the market today, read our guide to the 11 best invoicing software solutions for your small business.
What can you do to recover an outstanding invoice?
If a client misses a payment deadline, try to stay calm – sometimes it’s just an oversight.
Start with a friendly reminder (see an email template below)
Don’t follow up too quickly – if your terms are 30 days, wait a few extra days before sending your first reminder
Direct your reminder to the right person, which could either be your main client contact or their accounts team
Attach a copy of the invoice in your email reminders, to make it as easy as possible for your client to act on it
If you don’t receive a response to your emails, you can call to check if they were received and whether there were any issues you can resolve on the phone. And while you’re speaking with them, ask when you can expect payment.
Keep records of all communication, including who you spoke to and when, in case you need to escalate things further. At some point, you may even need to pause services until the invoice is paid.
Overdue invoice email templates
Knowing how to communicate without burning your bridges can be a delicate task. Here are some carefully worded templates you can use when chasing late payments.
1. Less than two weeks overdue
Subject line: Overdue payment ([YOUR COMPANY]) – [INVOICE REFERENCE]
Hi [CLIENT NAME],
I’m following up on invoice number [INVOICE REFERENCE]. It was due for payment on [INVOICE DUE DATE] and I wanted to confirm if you received it?
I’ve attached the invoice to this email again for reference. Can you please confirm the invoice has been scheduled for payment?
Many thanks,
[YOUR NAME]
2. More than two weeks overdue
Subject line: Overdue payment ([YOUR COMPANY]) – [INVOICE REFERENCE]
Hi [CLIENT NAME],
Further to my previous email, I’m reaching out regarding outstanding invoice [INVOICE REFERENCE] / [INVOICE BALANCE].
As the invoice is overdue, can you please update the payment status? If there are any issues, such as missing information, please let me know and I’ll send over an amended invoice.
I’ve attached the invoice to this email for reference.
Thanks,
[YOUR NAME]
3. Interest warning (30 days or more)
Subject line: Overdue payment ([YOUR COMPANY]) – [INVOICE REFERENCE]
Hi [CLIENT NAME],
Further to my previous email, I’m contacting you again on behalf of [YOUR COMPANY] regarding outstanding invoice [INVOICE REFERENCE] / [INVOICE BALANCE].
To remind you, as per our service agreement, we are entitled to charge X% interest per [DAY/WEEK] of the invoice going unpaid. To avoid this, please let me know if there are any issues.
I’ve attached the invoice to this email again for convenience.
Thanks,
[YOUR NAME]
4. Final reminders (extremely late invoices)
Subject line: Final reminder ([YOUR COMPANY]) – Invoice [INVOICE REFERENCE]
Hi [CLIENT NAME],
Further to my previous email, I’m contacting you on behalf of [YOUR COMPANY] regarding invoice [INVOICE REFERENCE] / [INVOICE AMOUNT DUE].
This invoice was due for payment on [DUE DATE] and remains unpaid. As we’ve not heard from you, I’m afraid we will shortly begin legal proceedings to receive the amount owed to [YOUR COMPANY].
Immediate payment will result in us closing this issue without the need for legal action.
I’ve attached a copy of the invoice to this email for convenience.
Thanks,
[YOUR NAME]
What are your legal rights regarding outstanding invoices?
Pursuing unpaid invoices may feel daunting, but understanding your rights is essential for protecting your business’s cash flow.
Under the Late Payment of Commercial Debts (Interest) Act 1998, UK businesses can automatically charge interest on overdue invoices and claim fixed compensation.
Interest you can charge: Bank of England base rate plus 8%, starting from the day after the agreed payment date. If no date was agreed, interest starts 30 days after the latest of delivery, invoice, or acceptance. Interest is calculated daily on the gross amount of the debt from the date it became due until it’s paid in full.
Fixed compensation you can charge: A fixed sum per invoice, depending on debt size:
£40 for debts under £1,000
£70 for debts between £1,000 and £9,999
£100 for debts of £10,000 or more
For example, if a client owes you £5,000 and pays 45 days late, you could charge statutory interest at 11.75% (the 3.75% BoE base rate plus 8%), which is £72.45. When added to the £70 fixed compensation, the total total charge would be £142.45.
There are three legal approaches to recovering outstanding invoices.
1. Mediation
At the first stage, it’s best to discuss the issue with your client. This mediation process allows you both to acknowledge and address any issues head-on. It’s also much cheaper than legal action.
You can learn more about mediation on the Civil Mediation Council website.
2. Formal demand
If informal reminders fail, a Formal Demand is the next step. This is a structured, legally recognised way to pressure a client into paying what they owe, while also demonstrating your seriousness about recovering the debt.
You can start by sending a letter before action (which formally notifies the client of your intent to take legal action if the invoice remains unpaid) and give them a clear deadline (eg 7 days) to pay the outstanding invoice. If they ignore it, you can escalate to a statutory demand (for debts over £750) or apply to wind up or bankrupt the company (for debts over £5,000). But be aware that statutory demands have strict criteria, and ignoring them can lead to serious consequences for your client, such as liquidation or credit restrictions.
We highly recommend seeking legal advice before following this route yourself.
3. Court action
If the invoice hasn’t been disputed throughout the entire process (including your invoice email follow-ups), you can take court action.
Follow the process online as outlined by the Justice Department. For claims under £100,000, you can file a claim online via Money Claim Online (MCOL). You’ll have to show there was sufficient communication between you and the client.
Free support is also available. You can also use the Small Business Commissioner which has recovered over £10m in late payments and now has enhanced powers, including fines and spot-checks for persistent late payers.
Always seek legal advice before taking action, but know your rights – you’re entitled to interest and compensation.
Wrapping up
Overdue invoices are a common challenge for millions of UK businesses, but with the right approach and tools, you can protect your cash flow and focus on growing your business.
Here’s a reminder of the key points:
Outstanding invoices can strain your cash flow and put your businesses at risk
Prevention is key, so set clear payment terms upfront, charge interest where appropriate, and use automated invoicing to stay organised
Start with friendly reminder emails and escalate gradually, keeping detailed records of all communication
You have legal rights under the Late Payment of Commercial Debts (Interest) Act 1998 to charge the Bank of England base rate plus 8% interest and fixed compensation
Other options are available should informal approaches fail, including mediation, formal demands, or court action
How Tide can help relieve the stress of overdue invoices
Chasing unpaid invoices can be stressful and time-consuming, but you could spend less time worrying and more time growing your business by automating the process.
One way to reduce the stress is by automating the email follow up process. Through your invoicing software, set up automatic emails to send every X number of days and let the system take care of the communication for you. Or you could outsource the follow-up process to an invoice processing service.
With Tide's invoicing feature, you can personalise professional email templates and send automated reminders for all your outstanding invoices. The invoice is then paid directly into your Tide account, so you can easily match transactions to your clients.
FAQs
How long can you chase an outstanding invoice for?
You can chase an unpaid invoice for up to six years from the due date, as this is the legal time limit for court action. After this period, the debt usually becomes unenforceable, but you can of course still request payment informally.
What should I do if someone disputes an outstanding invoice?
First, ask your client to explain their dispute in writing and review your records to check for any errors. If the invoice is correct, you could discuss the issue with them to find a fair solution, such as partial payment or correcting the work, and keep all communication documented.
Is there a difference between an outstanding invoice and an overdue invoice?
An outstanding invoice is any invoice that hasn’t been fully paid yet, whether it’s due or not. An overdue invoice specifically refers to one that’s passed its payment deadline, which is when you should start chasing payment or adding late fees.
