Late payments are amongst the major irritations for businesses operating in the UK. Even after doing all the necessary things, from completing the job, raising the bill, to fulfilling all the responsibilities, the money does not arrive in the bank account.
However, it would always seem like there is nothing but legal action available. Yet, most of the cases of unpaid invoices can be solved via a professional recovery method before taking it to court.
Knowing how to recover unpaid invoice UK business will help you manage the flow of cash in the business and save on the time that could have been wasted.
Why Unpaid Invoices Need Immediate Attention?
Before starting with reminders, make sure that the invoice itself is right. Surprisingly enough, many cases of late payment occur due to some minor administrative mistakes instead of intentional non-payment on the part of the customer.
Check the due date of the payment – Verify your contract, purchase order, and invoice to see that the terms of payment are set correctly.
Check the invoice – Make sure that the name of the customer, invoice number, amount, VAT and bank details are provided correctly.
Make sure that the work was done – Collect the corresponding proofs like delivery confirmation, signature, completed work, etc.
Check the previous correspondence – See if the client asked you about something in advance which caused the delay in payment.
According to the advice of the Small Business Commissioner, it is better to analyze the payment terms and check the invoices before starting to recover the payment.
A Practical Timeline to Chase Unpaid Invoice UK Businesses Can Follow
Rather than just sending reminders arbitrarily, ensure that there is some form of process to be followed.
Step 1: Send a polite reminder of payment
Action one
Once the deadline for payment has elapsed, begin with a friendly reminder instead of a threatening one. Provide all the required details such as the invoice number, the overdue amount, the deadline and payment details in a polite but professional manner.
Sending a polite reminder is the first step in handling outstanding invoices.
Step 2: Reaching Out to the Client
Method of communication
In an instance where there is no response to the reminders sent, phone calls can be made, or the head of Accounts Payable in that particular firm should be reached out to. This might help in solving the problem, since the underlying problem of the delay can be known.
Stage 3: Return the invoice to the client
No excuses
Sometimes there may be valid reasons why an invoice cannot be found. Just return the invoice with a relevant subject line like “Invoice 1048 – Unpaid” and ensure the payment details are correct.
Sending the invoice back is one of the procedures, especially if the customer claims he/she did not receive the invoice.
Step 4: Write an assertive letter reminder
Step Up
If the previous reminder letters have been ignored by the addressee, then write an assertive letter including the invoice and informing him/her that the money is to be paid on the specified day. Copies of all correspondence must be retained.
It is essential to have the documentation since it proves that you have done all that was possible before taking any further action.
In what circumstances can you charge interest on late payment?
If you happen to engage in a B2B arrangement in the United Kingdom, the statutory law will allow you to charge interest on your late commercial invoices. As per the Late Payment of Commercial Debts Statutory Interest Act of 1998, almost all companies have the right to claim the statutory interest of 8% plus the base rate of the Bank of England, other than any other interest agreement. Besides this, the government provides certain amounts of fixed compensation for collecting late commercial payments depending upon the amount of money owing.
Should you include any reference to interest in your reminder?
Yes, but the right time and tone to mention the interest should be selected. The proper way in most cases would be to let the customer decide their case voluntarily. If that does not work and the payment is ignored, you could tell them that interest applies to them by law.
What happens in case there is a dispute regarding the invoice?
An outstanding invoice may not necessarily be an instance where the person is just late in payment but could be one where there is a dispute regarding the amount on the invoice or the quality of the service or a contract dispute.
Settling the dispute through discussion or negotiation may be quicker and cheaper than legal proceedings. Mediation is actually an accepted way of solving monetary disputes before or during legal proceedings in the UK.
Consider mediation over court where possible
Think about mediation in case of court being necessary. It is not necessary that the solution should involve taking it to court in all cases. Through the process of mediation, the two concerned parties receive the help of a third party who mediates in order for the parties to reach an agreement. Mediation could provide a way out in terms of resolving the issue of money without going to court.
Mediation would be helpful for those companies wishing to retain the business relationship with their customer.
When should you Consider Using the Office of the Small Business Commissioner?
When you are a small company in the UK, and your invoice has been left unpaid by a large customer, and no resolution has been reached, the Office of the Small Business Commissioner might be able to help you. One of its responsibilities is to assist small companies in late payments and to contact the large company.
This will be particularly relevant when attempts at getting paid have failed but without going to court.
When should court action be taken?
Taking court action is always expected to be the very last option, not a first one. Both organizations and people can raise a money claim at the County Court when it comes to recovering a debt; however, the pre-action behaviour implies the necessity for both sides to try to settle their differences before initiating legal action.
But in case all communications and other means of settlement prove to be futile, the official raising of the money claim can become necessary. The key elements that would help to make such a decision will be the value of the debt, evidence, the customer’s reaction, and the feasibility of the claim.
How Lexarox Accounts could assist with keeping up with your invoice recovery process
Invoice collection becomes a whole lot easier when all your accounting records are well-organized from the very start. The accurate record-keeping process will enable you to track down any errors easily, observe payment trends, and keep all the records of the client’s accounts.
Lexarox Accounts provides a variety of accounting services for British companies, including bookkeeping, financial statements, payroll, taxation, and others. They also have specialists who handle credit control and are responsible for the management of invoicing, payments monitoring, reminders, and maintenance of a positive relationship with clients through a well-organized payment process.
For limited companies, sole proprietors, or any growing businesses, working with professionals and receiving accounting assistance would be a good choice since it will help to have a well-structured and updated record-keeping process, as well as keep the cash flow under observation. Additionally, Lexarox Accounts encourages cloud-based accounting and personalized accounting services, tailored according to specific business needs.
Contact Details:
Address: Lexarox Accounts, MS.128, 203-213 Mare Street, Hackney, London, E8 3JS
Tel: 0208 533 1358 Mobile: 0792 883 0368 / 0747 235 6282
Email: info@lexaroxaccounts.co.uk
Five ways to avoid late invoices in the future
- Send an invoice immediately after the completion of the task.
- Have all payment details settled prior to the beginning of a job.
- Provide proper payment instructions with every invoice sent out.
- Issue a friendly reminder as soon as the invoice becomes overdue.
- Maintain well-maintained records of invoices, agreements, and client communication.
Conclusion
Chasing a delinquent invoice from UK organizations does not only mean that one has to keep on sending increasingly strong emails to the organization. It means one has to take a more structured approach whereby one evaluates the invoice, communicates politely, escalates the situation incrementally while at the same time keeping in mind one’s legal rights.
Good invoicing techniques and accounting help will see the organization having good cash flows and little need for chasing delinquent invoices.
Frequently Asked Questions
How can I follow up an unpaid invoice in the UK?
Firstly, make sure you’ve looked at your invoice and payment terms, followed by sending a polite reminder and then contacting the client.
Can I charge interest on my overdue invoice?
Yes, statutory interest could be claimed on your overdue business invoice at 8% plus the Bank of England base rate.
How much compensation am I entitled to if a payment is late?
Legislation in the UK entitles you to €40, €70 or €100, depending on the amount of the commercial debt.
Do I need to go to court to reclaim my unpaid invoice?
Not necessarily. There are many cases where the issue could be sorted out without going to court.
How could the Small Business Commissioner deal with delayed payments?
Yes. Qualified small companies in the UK that have a payment dispute which remains unresolved could turn to the Office of the Small Business Commissioner.
How could Lexarox Accounts help with invoice management?
While Lexarox Accounts will provide accounting and bookkeeping services, the credit control part will include invoicing, as well as paying and reminder services.
