How to chase an unpaid invoice
Age the ledger from the due date so you chase in the right order, send a short factual reminder that names the invoices and the total, escalate on a written schedule rather than on how annoyed you are — and know that a late commercial debt in the UK carries statutory interest and a fixed recovery cost where the contract gives no substantial remedy of its own.
14 min read · 8 steps · 6 ways it goes wrong
What you need before you start
- A list of unpaid invoices with customer, invoice number, invoice date, due date, amount and anything received against it. The due date is the one that matters and the one most often missing.
- Your payment terms, as they appear on the invoice and in the contract. Whether you can charge interest, and at what rate, is decided there first.
- Credit notes and payments on account, allocated. An unallocated receipt makes a customer look like a debtor when they have already paid.
- A list of anything actually in dispute, with what the dispute is. A disputed invoice is not a late one and chasing it as though it were destroys the relationship and the argument at the same time.
- A decision about who sends what, and who is allowed to stop supply.
Clean the ledger before you age it
Everything below is only as good as the list it starts from, and sales ledgers are usually dirtier than anybody expects.
- Allocate the payments on account. A customer with an unallocated receipt shows as owing the full invoice.
- Allocate the credit notes, and check that each one is recorded as a reduction rather than as a second positive document.
- Take out anything in dispute and put it on its own list.
- Check for invoices sent to the wrong entity, or to the wrong address, which have never been seen by anybody who could pay them.
The tool for this step: Bookkeeping: Trial Balance, P&L and Balance Sheet — gives a real sales ledger with receipts allocated against invoices, so the outstanding balance is the balance rather than a total of documents.
Age it from the due date, not the invoice date
Days overdue is today minus the due date. Ageing from the invoice date makes everything on thirty-day terms look a month worse than it is, which sounds harmless until it drives the order you chase in and the tone you chase with.
Keep what is not yet due entirely separate. It is not late, it should never appear in a bucket, and it must never be chased — a reminder about an invoice that is not due yet tells a customer that your reminders can be ignored.
The tool for this step: Receivables Ageing & Payment Reminders — turns the list into buckets by days overdue with a total per customer, keeps the not-yet-due apart, and drafts a letter per debtor that names their invoices.
Read the report before you send anything
The ageing is a diagnosis, not just a chasing list.
- Concentration. If most of the overdue total is one customer, you do not have a collections problem, you have a customer problem, and it needs a different conversation at a different level.
- The oldest bucket. Anything that has been there for months is usually not a payment problem at all — it is a dispute nobody logged, an invoice never received, or a purchase order number missing from your invoice.
- The pattern. A customer who always pays two weeks late, every time, is telling you their terms rather than yours. That is a renegotiation, not a chase.
- Part payments. A customer paying round numbers against a balance is usually managing their own cash by instalments, and a payment plan you agree is better than a series of chases you do not.
Chase in an order, and make it the same order every week
Biggest and oldest first. The purpose is not fairness, it is cash: the hour you have goes where it recovers the most money. Within that, chase the ones you have a working relationship with first, because they are the ones most likely to pay on being asked.
One contact per customer per step, naming every invoice and the total. Nothing annoys an accounts payable department more than four separate emails about four invoices, and nothing gets ignored faster.
Escalate on a schedule, not on a mood
- Before it is due: a statement, not a chase. Many invoices are late because they never reached the person who pays them.
- A few days after the due date: a short, friendly, factual reminder. Invoice numbers, dates, amounts, total, how to pay. No adjectives.
- Two weeks: a phone call to the person who actually processes payments, followed by an email confirming what was agreed. The call is the step that works; the email is what makes it real.
- A month: a firmer letter from somebody more senior, with a payment date requested in writing, and — if your terms allow it — notice that interest and recovery costs will be applied.
- Beyond that: a formal letter before action, then stopping supply, then recovery. Each of those is a decision, not a reflex, and each should be taken by somebody who can live with the consequence.
Whatever the steps are, write them down and follow them for everybody. An escalation ladder that is applied to the customers you find annoying and not to the ones you like is not a policy, and it is the reason the awkward debts are always the oldest.
The tool for this step: Letter Mail Merge to PDF — writes one letter with placeholders and produces a PDF per customer from a spreadsheet, for the steps where a letter has to go out on paper.
Know what you can actually claim — the UK position
For a commercial debt between businesses, statute supplies a remedy where the contract does not provide a substantial one of its own. It gives a right to interest at a rate set by reference to the Bank of England base rate, a fixed sum per invoice as compensation for the cost of recovery, and reasonable additional recovery costs above that fixed sum.
Two practical points. First, you may claim it and you are not obliged to — many businesses reserve it and waive it as part of getting paid. Second, raising it for the first time in a letter before action, having never mentioned it in an invoice or a reminder, invites an argument you did not need. Put the entitlement on the invoice.
The tool for this step: Invoice Due Date & Settlement Discount Calculator | 1234Tools — works out the due date from the terms and the interest accruing on a late payment, and whether an early settlement discount is worth taking.
The formal step, and what it commits you to
A letter before action states the debt, the invoices, what you want and by when, and says what you will do if it is not paid. It has to be a step you are willing to take, because the next one is a claim.
Before sending it, check three things: that the invoice is not disputed, that you are claiming against the right legal entity, and that you have the evidence — the order, the delivery, the invoice, the terms. A claim against the trading name rather than the company is a claim against nobody.
Decide when to stop, and stop the same way every time
Not every debt is worth chasing. Below some amount, the cost of the chase exceeds the debt, and past some age the probability of recovery is low enough that the time is better spent on the next sale. Pick both thresholds in advance so that the decision is a policy rather than a mood.
Write off what you have decided not to pursue, properly, in the ledger. A sales ledger carrying five years of uncollectable debt gives a debtor figure nobody believes, ages badly, and quietly overstates both the assets and the profit that were recognised when the sale was made.
Where this usually goes wrong
6 things that actually happen, rather than a note asking you to be careful.
- Ageing from the invoice date. Days overdue means days past the due date. Aged from the invoice date, every invoice on thirty-day terms is a whole month further along than it really is, so a customer who is three days late sits in the same bucket as one who is a month late, and the tone of the letter that goes out is wrong for both. Worse, invoices that are not due at all appear in the ageing, and chasing an invoice that is not due teaches a customer that your reminders do not mean anything.
- Unallocated credits and receipts. A payment received on account but not matched to an invoice leaves the invoice showing as fully outstanding; a credit note recorded as a positive document does the same thing twice over. Both produce a chasing letter to a customer who has already paid, which is the single fastest way to lose the argument and the relationship in one message. The defence is to allocate before you age, and to check that any customer with both a large debt and a large unallocated credit is looked at by a person before anything is sent.
- The dispute nobody logged. An invoice sitting in the oldest bucket for six months is usually not a payment problem. It is a short delivery, a missing purchase order number, a price nobody agreed, or an invoice addressed to a company that no longer exists — raised once by somebody at the customer, mentioned to somebody at your end, and never written down. Every chase sent after that point is answered by silence, because as far as they are concerned the ball is with you. Anything over about sixty days deserves a phone call whose only purpose is to find out what is actually wrong.
- Interest that appears for the first time in the letter before action. The entitlement to statutory interest and recovery costs does not depend on having mentioned it, but the commercial reality is that a charge nobody has ever seen before, arriving with a legal threat, turns a collection into a negotiation about the charge. Put the entitlement on the invoice and in the terms, mention it in the second reminder, and then applying it is a consequence somebody was warned about rather than an escalation they can dispute.
- A statement that does not agree with their purchase ledger. Sending a statement is the most effective single step in collections, and it only works if the two ledgers can be compared. If your statement omits credit notes, uses your own reference rather than their purchase order number, or lists invoices they never received, their accounts payable team cannot match it and will do nothing. Before escalating anything, send a statement that shows every document, in their reference where you have it, and ask them to tell you which lines they do not have.
- Stopping supply without reading the contract. Stopping supply is the most powerful lever there is and the one most likely to be used badly. A contract may require notice, may not permit suspension for an unrelated invoice, and may carry penalties for non-delivery that are larger than the debt. Where the customer is dependent on you, cutting them off may also destroy their ability to pay at all. Decide before the ladder is written who is allowed to pull it, on what terms, and with what notice.
How long this should take
An hour to set up: produce the ageing, clean the ledger, agree the escalation steps and draft the three letters. Twenty minutes a week afterwards, which is the right rhythm — chasing monthly is too slow to change anybody’s behaviour, and chasing daily makes you the supplier everybody screens. Put it in the calendar on the same day each week and it stops being an emotional decision.
Frequently asked questions
What should the first reminder say?
The invoice numbers, the dates, the amounts, the total, and how to pay. No adjectives, no apology, no threat. Most first reminders work because the invoice never reached the right person, not because anybody decided not to pay.
Can I charge interest on a late invoice?
For a commercial debt in the UK there is a statutory entitlement to interest and a fixed recovery sum where the contract does not give a substantial remedy of its own. Whether you exercise it is a commercial decision. The rate is tied to the Bank of England base rate and moves with it, so any figure has to be worked out at the time.
Are the reminder letters safe to send?
Letters that state facts — the invoices, the amounts, the dates, and what you would like to happen — and that make no threat are ordinary business correspondence. A statement that an account will be put on hold is a statement of intent. A statutory demand, or a notice under your own contract terms, is a different kind of document and is a job for a solicitor.
When should I write a debt off?
When the expected recovery is less than the cost of pursuing it, on thresholds you set in advance rather than in the moment. Write it off in the ledger when you do, because a debtors figure carrying years of uncollectable invoices overstates both the asset and the profit.
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