Late payments on the rise: what UK businesses can do about unpaid invoices

Jasmine Harland, Solicitor

Late payment of invoices is a well known and growing pressure on UK businesses. A new report from R3 found that late payment pressures intensified for businesses in Q1 2026, as more and more businesses were carrying overview invoices on their books.

Late invoices inevitably create day-to-day cashflow problems for businesses and can quickly turn into wider difficulties. If you rely on regular payments to meet wages, VAT, rent or supplier costs, even a small number of late payers can create a knock-on effect across the business, especially during periods of higher operating costs and economic uncertainty.

Practical steps to take

1. Act early and be consistent – the longer an invoice is outstanding, the harder it can be to collect. Put controls in place that you follow every time an invoice becomes overdue (for example, automated reminders to confirm payment is due). Implement a realistic and consistent chasing timeline for overdue invoices, with clear reference to when escalation will take place.
2. Make it easy to pay, and hard to delay – ensure invoices are correct, contain all the information needed to be processed (for example, purchase order references where required), and are re-sent at the appropriate times. Mistakes on invoices are easy to avoid and can be costly, because even small errors can delay approval for payment and leave invoices unpaid for longer.
3. Know when to escalate – if reminders are ignored and/or there is non-engagement, it may be time to move to a more formal approach. Options may include sending a Letter Before Action, charging late payment interest (where appropriate), or instructing a solicitor who deals with debt recovery. Keep all correspondence documented and use clear communication channels you can evidence should the need arise. The following documentation will be key to recovery:

1. 1. Copies of the contract / terms entered into.
   2. A copy of any correspondence confirming the invoice is due and owing (such as a purchase order / proof of delivery).
   3. The invoice and a breakdown of the work involved to quantify the total of the invoice.
   4. Any correspondence relevant to the invoice.
   5. A clear calculation of what is outstanding.

Reducing the risk of late payments

Late payment remains a significant pressure point for many UK businesses and the data suggests the issue is not going away. Here are a few tips for UK businesses to reduce the risk of late payment:

• Put contracts in place and make sure your payment terms are clear, agreed and in writing, including due dates and how invoice queries will be handled;
• Confirm exactly who invoices should be sent to for processing and payment, for example many businesses use a dedicated accounts payable email address for invoices;
• Consider credit checks and credit limits for new customers and review limits for customers who repeatedly pay invoices late; and
• Keep communications professional, prompt and consistent. Early conversations about outstanding invoices often prevent long delays in receiving payment.

If you would like more information please contact our Dispute Resolution team on 0161 832 3434 or email [email protected]