How to chase overdue invoices professionally and effectively
Late payment is the single biggest cash-flow problem for freelancers, small businesses and agencies. The first 30 days after an invoice goes overdue are the most important: chase fast, chase in writing, and your odds of being paid stay above 90%. Wait three months and the same invoice becomes statistically very hard to recover. A professional payment reminder letter is the right first formal step — it is firm enough to prompt action without burning the relationship before formal demand or court action becomes necessary.
Your statutory rights on late payment
UK: the Late Payment of Commercial Debts (Interest) Act 1998 applies to all business-to-business debts. You are entitled to:
- Statutory interest at 8% above the Bank of England base rate, accruing daily from the day after the due date (s. 6)
- Fixed compensation for the cost of recovery per invoice (s. 5A): £40 for debts under £1,000; £70 for £1,000–£9,999.99; £100 for £10,000 and above
- Reasonable additional recovery costs if the fixed compensation does not cover them
- If your contract is silent, payment is due within 30 days of receipt of the invoice or the goods/services (whichever is later) under the Late Payment Regulations
These rights apply automatically — you do not need them to be in your terms. Mention them in the reminder; many debtors will pay just to avoid them.
US: there is no federal statutory equivalent. Your contract's interest and late-fee clauses control, capped by the state's usury limit. Without a contract clause, most states allow statutory pre-judgment interest (e.g., California Civil Code § 3289 at 10%, New York CPLR § 5004 at 9%). The federal Prompt Payment Act (31 USC § 3901 et seq.) covers payment from federal agencies to contractors. Several states (e.g., New York Prompt Payment Act § 756, California's Prompt Payment laws) impose statutory interest on construction and public-works payments.
The three-stage escalation that actually works
- Day 1–7 after due date — courtesy reminder. Assume oversight. Keep it warm, attach the invoice, ask for confirmation of when payment will be processed
- Day 8–21 — firm reminder. Mention statutory interest and recovery costs (UK), or contractual late fees (US). Set a fresh, specific deadline
- Day 22–30 — final notice / pre-action letter. Use the language of the UK Pre-Action Protocol for Debt Claims (or your state's pre-litigation custom). Make clear that court action will follow if payment is not received within 14–30 days
Beyond day 30 of a final notice, the next step is a Letter of Claim (UK Pre-Action Protocol, 30-day response) or filing in your local small-claims court (US, limits typically $5,000–$25,000).
What every payment reminder must contain
- Your full business name, address, and (UK) registered company number / VAT number
- The debtor's full legal name and address
- The invoice reference, invoice date, due date, and amount
- A clear statement that the invoice is overdue
- Reference to any previous reminders
- The statutory interest and compensation accrued (UK) or contractual late fees (US), itemised
- The total now due, including those add-ons
- The new deadline for payment and the consequences of missing it
- Bank details for prompt payment
- Sent by tracked mail (Royal Mail Signed For / USPS Certified Mail) plus email
Special situations
The debtor disputes the invoice: ask for the dispute in writing within seven days. If genuine, deal with it on its merits; if a stalling tactic, your final notice can address it head-on.
The debtor is in financial difficulty: consider a written, signed payment plan with explicit consequences for missed installments — preferable to a bad debt write-off.
The debtor is a US individual consumer: the Fair Debt Collection Practices Act (15 USC § 1692) applies to third-party collectors but not to you collecting your own debt. Even so, follow the FDCPA tone rules — no contact at unreasonable hours, no harassment, no third-party disclosures.
UK debtor in administration or liquidation: stop chasing immediately and lodge your claim with the appointed insolvency practitioner.
Mistakes that cost money
- Sending only by email — no proof of receipt for the limitation period
- Forgetting to add statutory interest and the £40–£100 fixed compensation (UK) — that money is yours by right
- Letting the debt drift past six years — limitation period for simple contracts in England (Limitation Act 1980, s. 5); typically 3–6 years in US states
- Tone that escalates too aggressively in the first letter — burns the relationship before negotiation has begun
- Failing to issue a final pre-action letter before suing — risks costs sanctions in the UK
What Lettrio generates for you in 30 seconds
Our AI drafts a professional payment reminder at the right escalation stage, with the invoice details, statutory interest and fixed compensation calculated for UK debts (or contractual late fees for US debts), a clear new deadline, and the consequence of non-payment. PDF ready to send by Royal Mail Signed For or USPS Certified Mail. First letter free, no account required.