Late payments are a huge headache for UK SMEs. Nearly three-quarters of UK SMEs are grappling with overdue invoices, with one survey finding an average of £96,000 owed per business in late payments.
This cash flow squeeze can choke a small company’s growth and even threaten its survival – the Federation of Small Businesses (FSB) estimates 50,000 business closures a year could be avoided if customers paid on time.
Put simply, waiting months for payments isn’t just an inconvenience; it’s a critical problem holding back our entrepreneurs.
John Day is Sales Director and Shareholder at Apollo Business Finance, a UK-based invoice finance provider helping small businesses unlock cash tied up in unpaid invoices. He speaks to business owners every week who are struggling with slow-paying clients. The good news is there are practical steps you can take right now to speed up customer payments and protect your cash flow.
Below John outlines seven strategies to help you get your invoices paid faster.
1. Set Clear Payment Terms Upfront
Make sure every sale or contract begins with crystal-clear payment terms. State the payment due date (e.g. “30 days from invoice date”) prominently on quotes and invoices and confirm that the client agrees.
Outline any late payment penalties or interest charges in writing – for example, note that you reserve the right to charge statutory interest on overdue invoices.
By setting expectations from the start, you give customers no excuse for confusion and create a basis to enforce timely payments if needed.
2. Invoice Immediately and Accurately
Don’t let completed work languish before billing. Send invoices as soon as you deliver the product or service, while the value is fresh in your client’s mind.
A prompt invoice signals professionalism and urgency. Make sure each invoice is accurate and easy to understand: include all necessary details like invoice number, issue date, due date, itemised charges, VAT (if applicable), and your banking information.
An error-free, detailed invoice helps avoid disputes or delays – the client has all the info needed to approve and pay without back-and-forth questions.
3. Use Digital Invoicing and Payment Options
Consider using technology to speed up your billing process. Using digital invoicing software or online accounting systems allows you to automate invoice creation and email delivery.
Many tools can send polite reminder emails before and after the due date, so you never forget to follow up. Also, offer multiple convenient payment options to make it easy for customers to pay promptly.
For instance, enable bank transfers, credit/debit card payments, or services like PayPal. Including a secure “Pay Now” link on electronic invoices can dramatically reduce friction – clients are more likely to settle the bill quickly when they can do it in a few clicks.
4. Maintain Open Communication and Follow Up
Staying proactive in touch with customers is key to getting paid faster. Maintain open, professional communication about upcoming and due invoices. A friendly reminder a week before the due date can prompt timely action.
If the deadline passes, follow up immediately with a polite but firm reminder that the invoice is overdue. Often, a late payer simply needs a nudge – they might have forgotten or misplaces the invoice. By checking in regularly (phone calls or emails), you show that you’re on top of your receivables.
Always keep the tone courteous and solution-focused, as maintaining a positive client relationship can encourage quicker payment without breeding resentment. Consistent, calm follow-ups make it clear you expect to be paid when preserving goodwill.
5. Incentivise Early Payments
Everyone appreciates a reward. Consider offering early payment incentives to encourage your customers to pay ahead of time. For example, you might give a small discount (say 2% off the invoice total) if the client pays within 10 days instead of the usual 30.
This “carrot” can be a win-win: your customer saves a bit of money, and you get your cash much sooner. Be sure to outline any early payment discount terms on the invoice so clients are aware of the opportunity.
When used judiciously, early payment incentives can improve your cash flow and build goodwill, as clients see that you value prompt payment and are willing to offer something in return.
6. Enforce Late Payment Penalties (When Necessary)
While positive incentives are helpful, it’s equally important to have consequences for chronic late payers. Including a late payment fee or interest charge in your terms (as allowed by UK law) serves as a deterrent for stalling.
For instance, UK businesses are legally entitled to charge 8% plus the Bank of England base rate on overdue B2B invoices – even if you don’t always enforce it, just knowing this is in your contract can motivate clients to prioritise your payment.
If a customer consistently drags their feet, don’t hesitate to apply the agreed late fee or interest on their overdue amount. You might also consider pausing further services or supplies to that client until they clear outstanding bills.
By firmly and fairly enforcing your payment terms, you send a message that your business won’t act as a free bank. Use this strategy with discretion – it’s a last resort – but having it in your toolkit can speed up slow payers and protect your company’s cash flow.
7. Consider Invoice Financing for Same-Day Payments
Despite your best efforts, some clients will still pay late. To prevent these delays from hurting your business, explore invoice financing as a solution.
Invoice financing (also known as factoring) allows you to get same-day payment on your unpaid invoices, rather than waiting 30, 60 or 90 days for clients to pay. Essentially, a finance provider pays you most of the invoice value up front, then collects the payment from your customer later.
This can be a game-changer for SMEs: you maintain steady cash flow and cover expenses on time, even if certain customers are slow payers. It’s not about making the client pay faster but about getting your money faster to keep your business running smoothly.
Many UK businesses use invoice finance to bridge gaps caused by late payments. It’s worth considering if overdue invoices are becoming a constant headache.
Bottom Line: Late payments don’t have to drag your business down. By implementing these seven strategies – from tightening your payment terms to leveraging technology and external financing – you can significantly accelerate your invoice settlements and safeguard your cash flow.
Stay professional and persistent and remember that maintaining clear policies and communication will foster respect from your customers.
For SMEs still struggling with late-paying customers, help is available. Apollo Business Finance, for example, offers free same-day quotes for invoice finance to show you how much funding you could get from your outstanding invoices.
This kind of support gives you peace of mind and the money your business needs, without having to wait on slow-paying clients. It’s a practical way to put you back in control of your cash flow – allowing you to focus on growing your business confidently.
About the Author:
John Day is Sales Director and Shareholder at Apollo Business Finance, a UK-based invoice finance provider helping small businesses unlock cash tied up in unpaid invoices. With over 20 years of experience in the finance industry, John specialises in helping SMEs access fast, flexible funding – particularly when they’ve been turned away by traditional lenders. He takes a hands-on, honest approach to finding solutions that work in the real world – so business owners can improve cashflow, stay in control, and keep growing with confidence.