Late or Non-Payment of B2B Invoices: A Guide for SMEs

For any SME, consistent cash flow is the fuel that keeps the engine running. When a client pays late, or not at all, it's more than just an administrative headache; it threatens your financial stability. Chasing overdue invoices can be time-consuming and awkward. Many business owners fear that being firm about payment will damage a valuable client relationship. This is a common challenge, but your membership association provides the tools and strategies to manage it effectively.

By using your association’s resources, you can implement a professional credit control process that gets you paid while preserving your commercial relationships. This guide outlines a step-by-step framework for handling late and non-payment disputes. It demonstrates how association support can help you protect your cash flow with confidence.

Case Study: A Creative Agency Recovers Debt and Keeps a Client

Imagine a creative agency in Leeds that completed a major branding project for a new client in Manchester. The final invoice for £15,000 was issued, due in 30 days. Day 31 passed with no payment. The agency's finance manager sent polite email reminders, which were ignored. Phone calls went unanswered. The relationship was souring, and the agency faced a significant hole in its quarterly budget.

Instead of immediately instructing solicitors, the agency director consulted their design trade association. The association provided a "Credit Control Toolkit," which included a structured chasing cadence and templates for escalating communications. Following the guide, the director sent a "Letter Before Action" using the association’s template. This letter clearly but professionally stated the intention to add statutory interest and consider further action if the debt wasn't settled.

This formal letter prompted an immediate response from the Manchester client, who admitted they were having their own cash flow problems. The agency then used another association resource, a guide to running a "without prejudice" meeting, to propose a constructive discussion. In a short call, they agreed to a payment plan: £5,000 immediately, with the remaining £10,000 split over the following two months. The entire dispute was resolved in 10 days, the debt was secured, and the client relationship was salvaged.

The Step-by-Step Framework for Managing Overdue Payments

This framework, based on best practices from leading UK associations, provides a clear and professional process for SME debt recovery.

1. Start with Invoice Hygiene

The best way to manage late payment is to prevent it. Ensure your invoicing process is flawless from the start.

• Clarity is Key: Your invoice must be clear, accurate, and contain all necessary information (Invoice Number, Date, PO Number, Due Date, Bank Details).

• Agree Terms Upfront: Your contract should explicitly state your payment terms (e.g., "Net 30 Days").

• Send to the Right Person: Confirm the correct contact or department for invoice submission to avoid administrative delays.

  
  

2. Implement a Professional Chasing Cadence

Your association can provide a template for a structured, escalating communication process. A typical cadence looks like this:

• 7 Days Before Due Date: A polite, automated reminder: "Just a friendly reminder that invoice #123 is due for payment next week."

• 1 Day After Due Date: A firm but polite follow-up: "Our records show that invoice #123 is now overdue. Please let us know when we can expect payment."

• 7 Days After Due Date: A telephone call to the accounts payable department. Be polite but direct.

• 14 Days After Due Date: A more formal email to the primary contact and finance lead, referencing the previous communications.

  
  

3. Triage the Dispute: "Can't Pay" vs. "Won't Pay"

If payment is still not forthcoming, you need to understand why. Is the client disputing the work ("won't pay"), or are they experiencing financial difficulty ("can't pay")? This triage is crucial. If it's a genuine dispute over quality, you need to engage your dispute resolution process. If it's a cash flow issue, the focus should be on negotiating a payment plan.

4. Build Your Evidence Pack

For any significant overdue debt, compile all relevant documents. This includes the signed contract, purchase orders, proof of delivery or project sign-off, the invoice, and a log of all your chasing communications. This pack is essential if you need to escalate the matter.

5. Reference Your Right to Interest and Late Fees

Under UK law (The Late Payment of Commercial Debts (Interest) Act 1998), you are entitled to claim interest and a fixed compensation sum on overdue B2B invoices. Your association's letter templates will reference this right. Mentioning it can be a powerful motivator for a client to settle the debt promptly.

6. Propose a "Without Prejudice" Meeting

If there is a genuine dispute or a cash flow issue, invite the client to a WP meeting to discuss a solution. This creates a safe space to negotiate without fear of legal consequences. The goal is to agree on a commercial settlement.

7. Negotiate Creative Settlement Terms

A settlement doesn't always have to be 100% of the cash now. Consider options like:

• A structured payment plan: Split the debt over several months.

• A partial credit: If there is a minor, genuine issue with the work, a small discount can unlock the majority of the payment.

• Security: For larger debts, you could ask for a personal guarantee or some other form of security as part of a payment plan.

  
  

8. Escalate as a Last Resort

If all else fails, your association can provide guidance on the final escalation steps. These are serious and should only be taken as a last resort:

• Letter Before Action: A final formal letter, often from a solicitor, setting out the debt and giving a final deadline for payment before court action.

• Statutory Demand: A formal demand for debts over £750. If unpaid for 21 days, it allows you to start winding-up proceedings against a company.

• Small Claims Court: For debts under £10,000, this is a relatively low-cost way to get a court judgment.

  
  

Scripts and Email Templates from the Association Toolkit

Email Template: 7 Days Overdue

• Subject: Overdue Invoice: #123

• Body: "Dear [Contact Name], Following up on our invoice #123 for [Amount], which was due for payment on [Due Date]. Our records indicate it is now 7 days overdue. Could you please provide an update on the status of this payment? A copy of the invoice is attached for your convenience."

  
  

Phone Script: Call to Accounts Payable

"Hello, my name is [Your Name] from [Your Company]. I'm calling about invoice #123 for [Amount], which is now overdue. Could you please confirm if the invoice has been approved and when we can expect to receive payment?"

Phrase for Proposing a Payment Plan

"We understand that cash flow can be challenging. To resolve this and maintain our good working relationship, we are prepared to discuss a structured payment plan. Would you be open to exploring that?"

Protecting Your Cash Flow Across the UK

The laws governing late payment UK-wide give SMEs strong rights, whether your clients are in England, Wales, or Scotland. Your association membership provides the practical tools, from letter templates to mediation for SMEs, to exercise those rights professionally and effectively. Using an association-backed framework for business dispute resolution and debt recovery shows clients that you are serious about getting paid, but also committed to finding fair and commercial solutions.

Don't let overdue invoices threaten your business's health. A structured, professional approach protects your cash flow and your client relationships.

Contact We Resolve today if you need help, advice, or guidance with your company's payment disputes.