Late payments can hurt any business – especially so if you are running a start-up that’s still getting off the ground. The Federation of Small Businesses estimate that as many as 37% of small businesses have cash flow issues as a direct result of late payments.

This article will show you how to remind your clients to pay once an invoice is overdue and what steps you should take if the money never arrives.

Get in touch – Emails

The first thing that you should do is send a polite email. This is especially true if you have built up a long-standing relationship with your client. Be sure to word the email in a friendly manner so that you do not jeopardise any potential business from them in the future.

The more understanding you are of their situation, the more likely it will be that once they pay, you can resume business as normal. It is completely reasonable and expected to send an email as soon as the payment is due.

Get in touch – Phone calls

If your client has not responded to your email politely reminding them that their payment is late, the next step that you should take is to call them directly. You should not take a “Jerry Maguire” approach to telephone calls!

By phoning them, you can gauge whether they are purposely not paying, if there is an underlying problem with finances at their end or whether they are dissatisfied with some aspect of your service.  A phone call will also make the person at the other end more inclined to give you a clear answer as the conversation is happening in real time.

If their payment is overdue by a week, then a phone call may be your best option especially if your email chase-ups are not yielding any results.

Get in touch – Formal demand letters

A formal demand letter may be necessary if you are still owed money and both the emails and the phone calls didn’t result in payment.

Formal demand letters should take a more serious tone. You may wish to remind them that the longer that they take to pay, the more interest will accrue on their debt.

This is the time where you do not have to be as friendly but be careful to avoid threats like taking legal action just yet as this may definitely damage prospects for future trade.

Debt recovery

There are three options if the multiple approaches you have taken to your client have not worked. These are:

Mediation – This involves sitting down with your client directly and talking things through. You will have to pay a small fee in order to do this however it is significantly cheaper than starting legal proceedings.

Send a statutory demand – This is a formal letter to which the recipient has 21 days to respond. If the letter is ignored, then you can apply to a court to either make them bankrupt or have their company wound up (for debts over £750). We recommend that you seek legal advice when structuring a statutory demand letter because there are specific criteria that needs to be met.

Court action – There is an easy online application process for all claims under £100,000. However, before claiming, you should make sure that there is enough evidence that proves the debt exists and is not in dispute, otherwise your application may be halted.

We can help

Whether you have been running a business for years or you’re a new business, we can help with claims for late payments. If you are owed money due to a late payment, call our specialist team on 01606 333 900 or email us at hello@burtonbeavan.co.uk.