Late payments and overdue invoices: getting paid

Late payments remain one of the biggest threats to UK businesses, particularly SMEs. While unpaid invoices might seem like a routine inconvenience, the reality is far more serious, impacting cash flow, growth, and in some cases, business survival.

Recent figures highlight just how widespread the issue has become:

• Over 1.5 million UK businesses are affected by late payments
• Businesses are owed an estimated £26 billion in unpaid invoices at any one time
  
• Late payments cost the UK economy around £11 billion per year
  
• Around 38 businesses close every day due to cash flow issues caused by overdue invoices
  
• As many as 1 in 5 invoices are paid late
  

Being paid on time is not simply about profit, it is about survival. Timely payment allows businesses to:

1. Pay staff and subcontractors
2. Meet their own financial obligations
   
3. Invest in growth and new opportunities
   

When payments are delayed, businesses often spend significant time chasing debts (on average around 86 hours per year), diverting focus away from running and growing the business.

It is a common misconception that you cannot recover payment without a written contract. In reality, particularly in industries like construction, many agreements are informal. It is not uncommon for businesses to proceed based on:

• Emails
• Text messages or WhatsApp exchanges
  
• Verbal agreements
  
• The simple fact that work has been completed and accepted
  

The law recognises these arrangements. A binding agreement can still exist where there is an agreed scope of work, a price (or a reasonable expectation of payment), and evidence the work was carried out. In many cases, the completion of the work itself is powerful evidence that payment is due.

Under UK law, businesses have clear rights when dealing with overdue invoices. If another business pays late, you may be entitled to:

• Statutory interest of 8% plus the Bank of England base rate
• Fixed compensation for recovery costs (typically £40–£100 depending on the debt)
  

This applies to most business-to-business transactions unless alternative terms have been agreed. Importantly, interest can begin accruing from the day after payment becomes overdue, providing a strong incentive for prompt payment.

The UK Government has recognised late payments as a major economic issue and is taking steps to address it. There are plans in place to cap payment terms at 60 days, reducing to 45 days over time, as well as proposals to introduce mandatory interest on late payments and increased transparency for large companies.

Late payment culture is under increasing scrutiny.

If your business is experiencing late or unpaid invoices, early action is key:

• Ensure invoices are clear and issued promptly
• Keep records of all communications (emails, texts, agreements)
  
• Follow up consistently and professionally
  
• Seek legal advice where payment is delayed or disputed
  

Taking action early can significantly improve your chances of recovery and avoid escalation. Whether or not you have a formal written contract, the law provides mechanisms to recover what you are owed. The key is understanding your rights and acting decisively.

At Ness Gallagher Solicitors, we regularly advise businesses on debt recovery, contract disputes, and protecting cash flow. If you are dealing with unpaid invoices or ongoing payment issues, seeking advice early can make all the difference.