{"id":12577,"date":"2024-07-20T18:06:58","date_gmt":"2024-07-20T17:06:58","guid":{"rendered":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/?p=12577"},"modified":"2025-04-23T16:32:10","modified_gmt":"2025-04-23T15:32:10","slug":"how-to-deal-with-unpaid-invoices","status":"publish","type":"post","link":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/how-to-deal-with-unpaid-invoices\/","title":{"rendered":"How to deal with unpaid invoices"},"content":{"rendered":"
An unpaid invoice can have a severe impact on your business. If you don’t get paid on time for the goods and services you provide, your cash flow is disrupted, and your administrative burden increases. And, let\u2019s face it, you need to have an awkward conversation or two with non-paying client.\u00a0<\/span><\/p>\n Unfortunately, late payments are more common than you might think. According to the accounting platform <\/span>QuickBooks<\/span><\/a>, over 70% of small to medium-sized enterprises (SMEs) were negatively impacted by unpaid invoices in 2023.\u00a0<\/span><\/p>\n But what exactly happens when a client doesn\u2019t pay you on time? Keep reading to find out how best to deal with unpaid invoices.<\/span><\/p>\n Before jumping to conclusions, double-check that you did your part and prepared the invoice correctly. If there are any mistakes or omissions on the invoice in question, this could delay the payment, or make the recipient unable to pay altogether.\u00a0<\/span><\/p>\n If you have made an error, don\u2019t assume the recipient will actively reach out and tell you. Maybe they hadn\u2019t noticed either, maybe they\u2019re busy, or maybe they\u2019re just trying to avoid paying. Either way, in the first instance, check that you\u2019ve prepared the invoice correctly.\u00a0<\/span><\/p>\n First, make sure you\u2019ve addressed the invoice to the correct person. The person or company you\u2019ve performed a service for might not necessarily be the one who pays you.\u00a0<\/span><\/p>\n For example, if you\u2019ve done marketing work for Mr Smith in Company A Limited, you might need to address the invoice to the accounting department, rather than Mr Smith himself. As a result, he may have forgotten to forward the unpaid invoice, or even failed to realise that he had received it at all, leaving it forever lost in his in-tray.\u00a0<\/span><\/p>\n If you are unsure how to address the invoice, contact the client and double-check. This will allow you to send it to the correct person and avoid delays.\u00a0<\/span><\/p>\n Missing important details, or making a mistake on an invoice, could mean the recipient cannot pay you. So, check that you\u2019ve included all the necessary details and haven\u2019t made any errors. As a minimum, the invoice should include:<\/span><\/p>\n If you\u2019re a sole trader (self-employed), you must also include your name and business name. If you run a private limited company or limited liability partnership (LLP), you also need to display your company number and full company name as it appears on your Certificate of Incorporation, including \u2018Ltd\u2019 or \u2018Limited\u2019 at the end.\u00a0<\/span><\/p>\n If you\u2019re registered for Value-added Tax (VAT), you must meet additional requirements when issuing an invoice. For example, you must include your VAT registration number, the VAT amount, and the unit price for each item listed on the invoice. For full details on how to prepare a VAT invoice, see the <\/span>HMRC<\/span><\/a> website.\u00a0<\/span><\/p>\n Did you arrange a specific payment date with the client, or merely state a timeframe for when the invoice should be processed? Let\u2019s say you agreed they\u2019ll pay the invoice within 30 days. Is that 30 days from the day you carried out the work, or 30 days after the end of the month in which you sent the invoice?\u00a0<\/span><\/p>\n The payment due date can be confusing, leaving both parties with different expectations. To avoid unpaid invoices, agree on an exact date for the money to reach your account.\u00a0<\/span><\/p>\n If there is a specific date, an invoice is considered late if it remains unpaid after 60 days of the business transaction (unless you\u2019ve agreed on a longer period). If there is no specific payment date, then by <\/span>law<\/span><\/a>, an invoice is late if it is delayed by 30 days or more after the customer receives the invoice, or after you deliver the goods or service.<\/span><\/p>\n Once you\u2019ve done all your checks and you\u2019re happy that everything adds up, let\u2019s examine the steps you can take if you have an unpaid invoice:<\/span><\/p>\n When someone owes you money, it can be a very uncomfortable and challenging situation. But remember that maintaining a strong and amicable relationship with your clients benefits both of you. So, first things first: get in touch with them. <\/span><\/p>\n How you contact them depends on the type of relationship you have. Have you worked together before? Maybe pick up the phone and give them a call. Was this your first time? A polite email or letter might be more suitable.\u00a0<\/span><\/p>\n At this stage, you\u2019re simply issuing a friendly reminder about the unpaid invoice. You should avoid being accusatory or confrontational. Try something like this:<\/span><\/p>\n Hi [name],<\/span><\/i><\/p>\n I hope you’re well. I\u2019m just getting in touch about your [month] invoice. In case you\u2019ve missed it, I\u2019ve attached it to this email. If you have any problems, please don\u2019t hesitate to contact me.<\/span><\/i><\/p>\n Thank you for your business, and I look forward to working with you again.<\/span><\/i><\/p>\n If they don\u2019t respond, try another form of communication. For instance, if they haven\u2019t replied to your email, call them, and vice versa. You should ensure you\u2019ve done everything you reasonably can before taking action.\u00a0<\/span><\/p>\n You could send them an unpaid invoice notification if that doesn’t work. Again, this is a friendly reminder, but this time, you\u2019re being more direct about getting in touch about an overdue payment.\u00a0<\/span><\/p>\n You could say something like this:<\/span><\/p>\n Hi [name],<\/span><\/i><\/p>\n I haven\u2019t heard from you since my previous email on [date] regarding invoice [invoice number], which was issued to you on [date].<\/span><\/i><\/p>\n I want to check that this invoice hasn\u2019t been missed or lost. I\u2019ve attached it again to this email for your convenience.\u00a0<\/span><\/i><\/p>\n I\u2019d really appreciate it if you could process this invoice as soon as possible, as payment is now [number] days overdue. If you have already paid, please confirm this by replying to this email.<\/span><\/i><\/p>\n It\u2019s also worth marking this message as of ‘high importance’. This way, it\u2019ll be flagged as urgent when it reaches the client\u2019s inbox and, hopefully, prompt them to take action. <\/span><\/p>\n At this stage, if you haven\u2019t pre-agreed an interest rate with the client in your service contract, you could consider charging statutory interest on the unpaid invoice. The <\/span>government website<\/span><\/a> advises that you can claim an annual statutory interest of 8% plus the <\/span>Bank of England\u2019s base rate<\/span><\/a>, which is currently 5.25%, so 13.25% in total. Here\u2019s an example:<\/span><\/p>\n In addition, you can charge a fixed sum for the cost of recovering an unpaid invoice. The amount you can charge depends on how much the client owes you.<\/span><\/p>\n <\/p>\nCheck that you’ve prepared the invoice correctly<\/h2>\n
To whom is the unpaid invoice addressed?<\/h4>\n
Have you included all of the right information?<\/h4>\n
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Is the invoice actually late?<\/h4>\n
Steps you can take to get paid<\/h2>\n
1. Contact the client<\/h4>\n
2. Send an unpaid invoice notification<\/h4>\n
3. Start charging interest<\/h4>\n
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