Late payment is a problem for many of the UK’s smaller companies. Government statistics show that a third of payments to small businesses are late.

If these bills were paid on time, it could provide an estimated £2.5bn annual boost to the economy.

Late payments can put small businesses under severe financial pressure, leading to cashflow problems and even bankruptcy in extreme situations.

But there are steps you can take to avoid or resolve these issues.

How to deal with unpaid invoices

When you take on a job, it’s good practice to establish payment terms with your customer early on, and agree everything in writing. See our advice on why no contract can mean no payment for more details.

But if your customers haven’t followed the payment terms, the Small Business Commissioner (SBC) website gives detailed step-by-step advice on how to tackle late payers.

This includes their ‘check, chase, choose’ process:

  • Check the invoice went to the right person and included all the relevant information.
  • Chase by calling or emailing to say payment is overdue, adding a reminder about possible further action.
  • Choose your next steps, either getting more advice or taking legal action.

You can take someone to county court to claim for money that you are owed (often known as the ‘small claims court’).

However, it might be quicker and cheaper to use a mediation service to resolve any problems with your customer. Or you can point the customer towards the Alternative Dispute Resolution service if they haven’t paid yet because they are making a complaint about your work.

Give your customers confidence that they’re buying from a business that they can count on. Become a Which? Trusted Trader.

When the Small Business Commissioner can help

The government launched the SBC in 2017 to try to ease the problem of late payments to small businesses, particularly from larger companies.

The current commissioner is Paul Uppal, who ran his own small business in the property sector for more than 20 years, giving him first-hand experience of many of the issues that small businesses face.

You can complain to the Small Business Commissioner about an unpaid invoice from another business if:

  • your business has fewer than 50 employees
  • the complaint is about a business with more than 50 employees and a UK office
  • the payment was due within the past 12 months
  • you’ve already tried to resolve the issue with your customer.

If your complaint meets these criteria, the SBC will assign a caseworker who will work with you to try to resolve the issue.

They may ask you for paperwork or further details of the case, as well as contacting your customer and asking them for their version of events. The SBC caseworker will then reach a decision and make recommendations.

To complain to the SBC, email complaints@smallbusinesscommissioner.gov.uk

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