Late payments can have a significant impact on small and medium-sized enterprises (SMEs), affecting cash flow, limiting growth and, in some cases, threatening the future of the business. With the Department for Business and Trade estimating that late payments cost the UK economy billions of pounds each year, having an effective invoicing and credit control strategy has never been more important.
The Government is also taking steps to tackle the issue, with the Commercial Payments Bill having its first reading in the House of Lords in May 2026. The proposed measures aim to strengthen payment practices, including a 60-day limit on business-to-business payment terms and greater powers to address persistent late payment.
However, businesses should not rely on legislation alone to protect their cash flow. Putting clear invoicing procedures in place, setting expectations from the outset and following up outstanding payments promptly can all help reduce the risk of late payments.
Here are ten practical steps your business can take to improve its invoicing strategy and get paid on time.
1. Agree payment terms before work begins
Make sure your payment terms are agreed in writing before starting work or supplying goods. Clearly outline payment deadlines, accepted payment methods and the action that may be taken if an invoice becomes overdue.
Setting expectations from the beginning helps prevent misunderstandings, reduces the likelihood of disputes and gives customers a clear understanding of their obligations.
2. Invoice promptly
Avoid delaying invoices until the end of the month if goods or services have already been delivered. Issuing invoices promptly means the payment period starts sooner and reduces unnecessary delays in receiving money owed to your business.
Where possible, make invoicing part of your standard workflow so that it happens as soon as the relevant work is completed.
3. Make invoices accurate and easy to understand
An incorrect or incomplete invoice can quickly lead to payment delays. Ensure every invoice contains the necessary information, including:
- Your business details and the customer’s contact information.
- A clear description of the goods or services provided.
- The invoice date and a unique invoice number.
- Any required purchase order number.
- The total amount due and any applicable VAT.
- The payment terms and due date.
- Clear payment instructions.
Taking a few extra moments to check each invoice before sending it can help avoid unnecessary queries and disputes.
4. Offer convenient payment options
Make it as easy as possible for customers to pay you. Depending on your business, you could offer bank transfers, card payments, online payment links or direct debit.
Including clear payment instructions and, where appropriate, a direct payment link on your invoices can remove unnecessary obstacles and encourage customers to settle their accounts promptly.
5. Check customer creditworthiness
Before entering into a significant contract with a new customer, consider carrying out credit checks and basic due diligence.
Reviewing a customer’s financial position, payment history and available company information can help identify potential warning signs, such as previous insolvencies or a history of businesses entering liquidation.
Although credit checks cannot eliminate every risk, they can help you make informed decisions about payment terms and whether additional safeguards are needed.
6. Request deposits or staged payments
For larger projects or contracts that require significant upfront expenditure, consider asking for a deposit before work begins.
You could also agree on staged payments linked to specific milestones throughout the project. This helps spread the financial risk, reduces the amount outstanding at any one time and ensures your business is not funding the entire cost of a project while waiting for payment.
7. Automate reminders and follow-ups
A consistent credit control process is essential for keeping outstanding invoices under control. Many accounting software packages allow you to automate payment reminders, helping you maintain regular communication without adding significantly to your administrative workload.
A structured process could include:
- Sending a friendly reminder three to five days before the payment due date.
- Issuing a reminder on the due date if payment has not been received.
- Following up by email or telephone shortly after the payment becomes overdue.
- Escalating persistent non-payment in line with your credit control policy.
Automated reminders can help prevent invoices from being overlooked, while personal follow-ups allow you to identify and resolve any issues quickly.
8. Maintain strong customer relationships
Good communication can make a real difference when it comes to getting paid on time. Regular contact with customers helps build trust and makes it easier to address invoice queries before they become bigger problems.
If a customer raises a concern about an invoice, respond promptly and work towards resolving the issue. At the same time, do not be afraid to have a polite but direct conversation about overdue payments.
Maintaining a professional relationship while setting clear expectations can help protect both your cash flow and your long-term customer relationships.
9. Monitor outstanding invoices and cash flow
Do not wait until cash flow becomes a problem before reviewing your outstanding invoices.
Regularly review your aged debtors report to identify which invoices are approaching their due dates, which are overdue and which customers repeatedly pay late.
Monitoring these figures helps you identify patterns, prioritise follow-ups and make more informed decisions about your business’s finances. It can also highlight when your credit control procedures need to be strengthened.
10. Understand and exercise your legal rights
If a customer consistently fails to pay, your business may be entitled to charge statutory interest and claim certain debt recovery costs on overdue commercial invoices, subject to the applicable legislation and contractual terms.
Make sure you understand the rules that apply to your circumstances before taking action. Where appropriate, explaining the consequences of continued non-payment may encourage a customer to settle their outstanding balance.
If informal reminders are unsuccessful, consider seeking professional advice on the appropriate next steps for recovering the debt.
A simple invoicing strategy to follow
For many SMEs, an effective approach does not need to be complicated. Consistency is key.
A straightforward process could look like this:
- Carry out credit checks on new customers where appropriate.
- Agree payment terms in writing before work begins.
- Request deposits or staged payments for larger projects.
- Issue accurate invoices as soon as possible.
- Make payment convenient by including clear instructions or a payment link.
- Send automated reminders three to five days before the due date.
- Contact customers promptly if payment is missed.
- Escalate persistent late payments in line with your credit control procedures.
Following a clear process helps ensure invoices are not forgotten and that outstanding debts are dealt with before they become a more serious problem.
Protect your cash flow with the right support
Late payments can place unnecessary pressure on even a well-run business. However, by establishing clear payment terms, invoicing promptly and maintaining a proactive credit control process, SMEs can reduce the risk of late payments and improve their cash flow management.
At Bryden Johnson, we understand the importance of maintaining a healthy financial position and planning for the future. If you would like advice on managing your business finances, improving your financial processes or planning for sustainable growth, please contact our team.
Get in touch with Bryden Johnson on 0208 686 0255 to discuss how we can help your business.