Company invoicing and late payment: terms, evidence and collection

Put the correct legal company on the invoice

A trading brand may appear prominently, but the customer needs to know which legal person supplied the work. Use the company’s registered name and required company disclosures, alongside a clear invoice number, invoice date, customer details, supply description, amount and payment instructions. If VAT registered, apply the additional VAT-invoice requirements and retain the underlying tax record.

Do not use a formation certificate as proof that an invoice is correct or an invoice template as proof of VAT entitlement. Check the supply, tax point and whether VAT applies. A sole trader becoming a company must change contracting and invoicing arrangements deliberately; the new company is not automatically entitled to collect every invoice raised by the old business.

Agree payment and acceptance terms before supply

Discuss payment terms while the customer can still choose whether to contract. State when an invoice can be raised, when it becomes due, what acceptance evidence is required and how disputes should be notified. Adding new late-payment terms to an invoice after the work is complete may not incorporate them into an existing contract.

For business contracts, the statutory late-payment framework can apply where agreed terms are absent or where particular conditions are met. Public authority and business-customer rules differ, and agreed periods can be subject to fairness requirements. Consumer sales need a different analysis. Ask a solicitor to check unusual long-payment arrangements or terms that attempt to replace statutory remedies with an inadequate alternative.

• Confirm the legal customer and billing contact.
• Obtain purchase-order requirements before starting.
• Agree milestone acceptance and due dates in writing.
• Check whether the customer is a business, consumer or public body.
• Preserve the version of terms accepted by the customer.

Build a debt file before there is a dispute

Keep the accepted quotation, contract, purchase order, correspondence, delivery record and invoice together. For services, record the scope agreed and the work delivered. A customer claiming work was outside scope may be raising a genuine contractual dispute, not merely delaying payment. Evidence should show how additional work was authorised rather than relying on the supplier’s own notes alone.

Verify changes to customer bank or contact details through trusted channels. Use a clear audit trail for credit notes and revised invoices, and do not erase a disputed original invoice. Where a client says it never received an invoice, check the billing address and resend it with the due date and contract reference. Administrative errors are often resolved faster by correcting the record than by immediately threatening legal proceedings.

1. 1

   Save the accepted quote and terms.

2. 2

   Record scope changes and customer approval.

3. 3

   Keep delivery or completion evidence.

4. 4

   Send invoices through the agreed channel.

5. 5

   Log reminders, responses and any disputed amount.

Calculate statutory remedies only after checking eligibility

For qualifying late commercial payments, statutory interest is generally eight percentage points above the relevant Bank of England base rate. Do not hardcode today’s base rate into a timeless calculator: the statutory framework includes reference-rate rules. Where the contract provides a different remedy, assess how it interacts with statutory rights before charging both.

The fixed debt-recovery amount depends on the debt band: £40 below £1,000, £70 from £1,000 to £9,999.99 and £100 at £10,000 or more. Additional reasonable recovery costs can require further analysis. These are not a charge to add to every late consumer invoice. Give the customer a transparent calculation with the debt, due date, applicable rate, days and recoverable charge identified.

Use a proportionate collection sequence

Start with a polite reminder and confirm there is no missing purchase order, invoice or unresolved delivery issue. Follow with a clear statement of the outstanding debt and requested action. If a dispute is raised, separate the agreed and disputed amounts and explore resolution. A written payment plan should state dates and consequences without disguising the fact that the original payment is overdue.

Before court action, check the applicable pre-action requirements, including differences depending on the debtor. Preserve evidence, assess enforceability and consider the cost of recovery relative to the debt. An insolvency demand is not a substitute for resolving a genuinely disputed invoice. Seek legal advice for material disputes or where a customer appears insolvent.

Worked example: distinguish principal and recovery charge

Illustrative example: a company customer owes £2,000 for accepted work under a qualifying commercial contract. The fixed recovery band is £70. Interest, if properly claimable, must be calculated separately using the applicable reference rate and number of overdue days. The company does not simply increase its sales revenue to £2,070 and forget the original debt evidence.

The debtor then identifies a genuine £200 scope dispute. The supplier reviews the approval record and asks for the undisputed amount while the issue is investigated. That dispute may affect what is recoverable and how escalation should proceed. This example illustrates the process and statutory band; it does not assume a live base rate or predetermine the legal result.

Review a disputed invoice before escalation

When a customer disputes an invoice, the supplier should identify the specific reason and compare it with the contract. The issue may be an unapproved scope change, missing acceptance, an incorrect billing entity or a genuine quality problem. The company preserves the original invoice and all variations rather than replacing the record with a cleaner version. It separates agreed and disputed amounts, confirms the customer’s payment contact and asks for the evidence supporting any claimed deduction. The collection process becomes clearer when both sides know what is actually contested.

The company then checks the remedies that apply to the particular relationship. A qualifying B2B debt may support statutory interest and recovery costs, while a consumer transaction or different contractual remedy requires another analysis. The calculation identifies principal, due date, relevant reference rate and days. Before formal action, the supplier checks the applicable pre-action requirements and realistic enforcement prospects. A court judgment is not the same as collecting cash, particularly if the debtor has no assets or is insolvent. Legal costs and relationship effects are considered alongside the amount owed.

After resolution, the company updates its commercial controls. It may require written scope changes, clearer acceptance tests, milestone payments or credit limits for that customer type. The debt file remains part of the accounting record, with any credit note or settlement properly reflected. Repeated administrative delays are distinguished from recurring disputes and financial distress. The aged-debtor report gives each balance a next action and owner, so unpaid revenue does not remain indefinitely in a forecast as though cash collection were certain.

1. 1

   Gather the records described above before making the decision.

2. 2

   Review the case-specific assumptions with the appropriate adviser.

3. 3

   Record the agreed action, responsible person and relevant dates.

4. 4

   Reconcile the outcome to the company’s actual records.

Reduce repeat delays with commercial controls

Review credit limits, deposits and milestone billing before accepting larger orders. For a new customer, confirm the contracting entity and who can approve work. Where a client consistently delays payment, price and terms should reflect that risk; a large revenue figure is not useful if the company cannot convert it into cash.

Keep an aged-debtor report and assign each overdue balance a next action. Feed recurring disputes back into clearer quotations, acceptance criteria and invoice descriptions. Monitor cash separately from profit so wages and taxes do not depend on optimistic collection dates. If overdue debts threaten the company’s own ability to pay creditors, seek financial advice early rather than relying solely on more reminders.

Common questions

Official sources & further reading

This guide draws on the official guidance below. Rules, fees and individual circumstances can change; check the relevant source before acting.

• GOV.UK: Invoicing and taking payment
• GOV.UK: Late commercial payments
• GOV.UK: Debt recovery costs

General UK information, primarily for private companies limited by shares. This is not personalised legal, tax or financial advice. An accountant or solicitor can help apply the rules to your situation.