For small businesses, late payments can be the difference between surviving and thriving. In fact, late payments remain one of the biggest hazards for SMEs in 2025. The government estimates that small businesses are owed over £20 billion in unpaid invoices at any given time. That’s a huge amount of debt!
‘As accountants, we often see the impact first-hand,’ says Felicity Reader, Accounts Senior with re:accounts Chartered Accountants in Stevenage. ‘Many businesses have unpaid invoices piling up, creating cashflow problems. Some clients rely on expensive short-term loans just to settle their payroll commitment. By being proactive, businesses can minimise their late payments.
‘One simple but effective strategy is the 5-15-30 model. This involves sending a payment reminder five days after an invoice is overdue, escalating at 15 days and formally addressing or even pausing services at 30 days.’
Felicity adds: ‘It might feel overly assertive, but it’s about professionalism and ensuring fair treatment for small businesses … especially for your business!’
Here are six areas that can help payments arrive on time:
1. Sharpen Up Invoicing
Invoice immediately after delivering goods or services. Clear details, such as like payment terms, purchase order numbers and bank details reduce excuses for delays. Accounting software such as Xero and QuickBooks can automate reminders to keep everything on track. (We’re huge Xero fans – ask us about online bookkeeping.)
2. Monitor Proactively
Review monies owed weekly and use dashboards to visualise overdue invoices. Segment customers; if a client consistently misses payment deadlines, they may require stricter terms. Forecasting worst-case payment delays also ensures you are not caught off guard.
3. Strengthen Credit Controls
Customers do not deserve the same credit terms. Set clear credit policies, run checks and reassess credit limits every 6 – 12 months. For your new clients, shorter terms or upfront payments can reduce risk.
4. Improve Collection Strategies
Offer clients a professional but consistent follow-up process. Start with a polite “just checking” message at day one and progress to more formal notices if payments remain outstanding. Track all communication and outcomes to ensure nothing slips through the cracks.
5. Review Policies and Contracts
A written payment policy and clear client contracts can help reduce the likelihood of late payments. Including interest on late invoices is an effective deterrent. Communicating how overdue accounts are escalated is hugely important.
6. Look at the Bigger Picture
Building cash reserves, offering early payment discounts or exploring invoice financing can give you much-needed breathing room. Reviewing your customer base is also important as you should not rely too heavily on a slow-paying client.
Do late payments create pressure for your business?
Would you like your business to be more resilient?
Talk to the friendly experts at re:accounts Chartered Accountants. You deserve to be paid on time. Proactive changes can make a big difference. Let’s explore the options.
