Late payment is often described as the tax on doing business in Britain, and for good reason: thousands of otherwise healthy small firms are pushed to the brink each year by customers who simply do not pay on time. The good news is that the law is firmly on the creditor's side, and there are practical routes to turn arrears into cash.
Your statutory rights
Under the Late Payment of Commercial Debts (Interest) Act 1998 and the 2013 regulations, when a business customer pays a commercial debt late you are automatically entitled to:
- Statutory interest of 8% above the Bank of England base rate.
- Fixed compensation per invoice (£40 for debts under £1,000, £70 up to £10,000, £100 above £10,000).
- Reasonable recovery costs above the fixed sum where they exceed it.
These rights apply automatically — you do not need them written into your contract, and terms that try to exclude them are generally unenforceable.
When is a B2B payment officially late?
If your contract sets a payment period, that governs — though periods over 60 days can be challenged as grossly unfair. If nothing is agreed, the default is 30 days from delivery or invoice. After that, the statutory clock on interest and compensation starts to run.
Charging statutory interest is not aggressive — it is your legal right, and adding it to demands often prompts payment because it signals you know the rules.
The escalation ladder
- Reminder and statement with interest and compensation added.
- Letter before action setting a deadline and warning of court proceedings.
- Court claim for a CCJ, then enforcement.
- Statutory demand where the debt is undisputed and over £750, as a precursor to insolvency proceedings.
When chasing is not worth it
Sometimes the customer is stalling, insolvent, or simply not worth the fight. Every hour your finance team spends chasing is an hour not spent selling. This is where selling the debt comes in: you convert an ageing, uncertain receivable into immediate cash and hand the collection headache to a professional buyer.
➜ Turn your arrears into cash from £19.90
Protect yourself for next time
- Run credit checks on new business customers.
- Agree clear payment terms in writing and state that statutory interest applies.
- Invoice promptly and chase early — the older the debt, the harder it is to collect or sell.
- Keep every signed delivery note, contract and acknowledgement.
Conclusion
You have strong rights against late-paying business customers — use them. Add statutory interest, escalate methodically, and where a debt is going nowhere, sell it rather than let it age. Cash today beats a perfect claim that never gets paid.
