Overdue Invoice? Reminders, Late Fees and Next Steps

What should you do when an invoice is overdue?

Start with a polite reminder the day after the due date, and resend the invoice with it. Follow up on a fixed schedule, at about 7, 14 and 30 days late, getting firmer each time. Add a late fee or interest only if your terms or the law allow it. If the client still has not paid after a final notice, move to a formal letter before action and then a court claim, a collection agency, or a write-off.

An overdue invoice is often not a refusal. The invoice went to the wrong inbox, is waiting for someone to approve it, or is missing a purchase order number the client’s accounts team needs. Your first job is to find out which of these it is. Only then does it make sense to talk about fees.

This guide assumes the invoice itself was right: correct client name, amount, due date and payment details. If you are not sure what counts as “due” under Net 30, EOM or “due on receipt”, the terms are explained in invoice payment terms explained. Payment terms only tell you when the clock starts. Everything below is about what to do once that date has passed.

A payment reminder schedule that works

The biggest mistake with overdue invoices is chasing only when you remember, or when you are short of cash. That makes the client’s delay unpredictable for you and makes your reminders feel personal to them. A fixed schedule turns chasing into routine admin. The client learns that your invoices get followed up on set days, and you stop agonising over each email.

The exact days matter less than using the same ones every time. Two adjustments are worth making. If you know the client pays suppliers in a weekly or fortnightly payment run, time the +7 reminder to land a day or two before that run, not the day after it. If the invoice is large compared with your monthly income, add a phone call at +7 and do not wait for +14.

Keep a log of every contact: date, channel, who you spoke to and what they said. If the debt ever goes to a court or an agency, that log is your evidence that you gave the client every reasonable chance to pay. A column in the spreadsheet where you track your invoices is enough.

Payment reminder email templates for each stage

These templates are short on purpose. The person who reads them may be handling many suppliers, so the invoice number, amount and due date should be visible without scrolling. Put the invoice number in the subject line of every email so the whole chain stays in one thread on their side. Replace the parts in square brackets.

Before the due date

On the due date

First overdue reminder, 3 to 7 days late

Second reminder, around 14 days late

Firm reminder, around 30 days late

Final notice, around 45 days late

Two rules apply to every template. First, only threaten a step you will actually take. A final notice that is followed by another “final” notice teaches the client that your deadlines are soft. Second, keep emotion and accusations out of writing. If the matter ends up in front of a judge or a mediator, you want your emails to read as calm, specific and reasonable.

Phone calls often work better than a fourth email. Ask a neutral question: “Is there anything stopping this invoice from being paid?” The answer tells you whether you have an admin problem (wrong approver, missing supplier set-up form), a cash-flow problem (the client wants time), or a dispute (they are unhappy with the work). Each needs a different response, and the rest of this guide covers all three.

How to calculate a late fee on an invoice

There are two common ways to charge for late payment: a flat fee, or a percentage of the overdue balance for each month (or day) it stays unpaid. Whichever you use, it must be agreed in advance. That means it is written in the contract or terms the client accepted before the work started. It is not enough to print it on the invoice for the first time after the work is done. It also has to be allowed where you and the client are. Limits on late fees and interest differ between countries and, in the US, between states, so check the rules that apply to you before you set a figure.

Worked example: 1.5% a month on a $2,400 invoice

Say a web designer’s terms say that balances more than 30 days overdue attract 1.5% a month, simple. The client owes $2,400.00. One month of late fee is $2,400.00 × 0.015 = $36.00. If the invoice stays unpaid for three months after the fee starts, the fee is $36.00 × 3 = $108.00, and the client owes $2,508.00.

The compounded line shows why the wording in your terms matters. Charging 1.5% on the balance including last month’s fee gives $109.63 after three months, not $108.00. Over a full year, 1.5% compounded monthly works out to about 19.56%, not 18%. Unless your terms clearly say interest compounds, charge simple interest on the original balance. It is easier to defend, and it is what most people expect when they read “1.5% per month”.

To check a figure for a different rate or period, the simple interest calculator takes the principal, the annual rate and the time in years. For a period in days, enter the days divided by 365 (45 days is about 0.1233 years). For a quick “what is 1.5% of this balance” check, the percentage calculator is faster.

How to charge statutory interest on late payments in the UK

In the UK, a business that pays another business late can be charged statutory interest even if your contract says nothing about interest. The rate is 8% plus the Bank of England base rate, and it applies to business-to-business transactions only (https://www.gov.uk/late-commercial-payments-interest-debt-recovery/charging-interest-commercial-debt). You cannot claim statutory interest if the contract sets a different interest rate. Your own clause replaces it.

When does a payment become late? If you agreed a payment date, that date applies, although the law says an agreed date must usually be within 60 days for business transactions and 30 days for public authorities. If no date was agreed, the payment is late 30 days after the customer receives the invoice or after you deliver the goods or service, whichever is later (https://www.gov.uk/late-commercial-payments-interest-debt-recovery).

Which base rate to use

The base rate is fixed for six-month periods. The rule sets the rate at 8% over the Bank of England’s official dealing rate. For interest that starts between 1 January and 30 June, you use the rate in force on the previous 31 December. For interest that starts between 1 July and 31 December, you use the rate in force on the previous 30 June (https://www.legislation.gov.uk/uksi/2002/1675/article/4). The rate stays fixed for that debt even if Bank Rate changes later.

On 21 September 2026, Bank Rate was 3.75%. The Bank’s Monetary Policy Committee kept it at 3.75% at its meetings on 18 June, 30 July and 17 September 2026, so it was 3.75% on 30 June 2026 (https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate). For a debt where interest starts between 1 July and 31 December 2026, the statutory rate is therefore 8% + 3.75% = 11.75% a year. For any other period, look up the rate on the relevant 30 June or 31 December and use that in place of 3.75%.

Worked example: £4,800 paid 91 days late

Say a UK consultancy invoices another company £4,800.00, due on 15 July 2026. The contract says nothing about interest. The client finally pays on 14 October 2026, 91 days after the due date. Interest started in July, so the reference rate is the 3.75% in force on 30 June 2026, and the statutory rate is 11.75%.

If you round the daily figure to £1.55 before multiplying, you get £141.05, 44p more. Keep the unrounded daily rate and round only the final interest figure. That is also the only version a careful client can reproduce exactly. The interest keeps growing by about £1.55 a day until the debt is paid, so state in your letter the date the interest has been calculated to and the daily rate from then on.

Fixed compensation for recovery costs

On top of interest, you can charge a fixed sum for the cost of recovering a late commercial payment. The amount depends on the size of the debt, and you can only charge it once for each payment (https://www.gov.uk/late-commercial-payments-interest-debt-recovery/claim-debt-recovery-costs).

Gov.uk also says a supplier can claim reasonable costs each time it tries to recover the debt. On small invoices the fixed sum often matters more than the interest. A £650.00 invoice paid 60 days late at 11.75% earns only £12.55 of interest, but the £40 fixed sum lifts the total claim to £702.55. It is worth claiming both, because together they make paying you late a real cost rather than a free loan.

Statutory interest covers business-to-business debts. If your client is a consumer, it does not apply. Any interest or fee has to come from your contract with them, and consumer protection rules may limit what is fair. Outside the UK, the rules are different: check your local tax or business authority’s guidance, not these figures.

How to add a late fee or interest to an invoice

Do not edit the original invoice and resend it with a higher total. That invoice has already been issued, may already be in the client’s system, and may already be in your own tax records. Gov.uk’s guidance on statutory interest says to send a new invoice if you decide to add interest to what you are owed. The same approach works well for contractual late fees.

• Issue a new invoice with the next number in your sequence, dated today.
• Add one line per charge: “Late payment interest on invoice INV-0142, 16 July to 14 October 2026, 91 days at 11.75%” and, if claimed, “Fixed compensation for recovery costs”.
• In the notes, refer back to the original invoice number, its amount and due date, and the clause or law you are relying on.
• Send a statement of account alongside it showing the original invoice, the interest invoice and the total now outstanding.
• If the client pays part of the debt, record it against the original invoice first and recalculate interest on the lower balance from the payment date.

The invoice generator handles this without any extra set-up. It suggests the next number in your series and warns you if a number is already used. It also lets you add a custom field such as “Relates to invoice INV-0142”. You can put the late-payment clause in the terms box. When the original invoice is finally settled, you can record the amount already paid or mark it as Paid to show a zero balance and a PAID stamp. The tool does not send reminders or collect payments. You send the PDF yourself.

Whether late fees and interest are taxable income, and whether VAT or sales tax applies to them, depends on where you are. Ask your tax authority or an accountant. Do not guess and add tax to the interest line.

What to do when a client won’t pay the invoice

By around 45 days overdue you usually know which kind of non-payment you are dealing with. The right next step depends on it, so work it out before you escalate.

A partial payment plan is often worth more than a court judgment. Say a client owes £3,600.00 and offers £600.00 a month for six months. Put the plan in writing with the dates and amounts. Say what happens if a payment is missed: the whole remaining balance becomes due, and any interest you waived is charged again. Then track each payment against the plan. The plan’s six payments must add up to the balance (6 × £600.00 = £3,600.00). If they do not, say in writing how the difference is handled.

Stopping work is your strongest lever while a project is still running, and it costs nothing. Only do it if your contract allows it. The standard wording is that you may suspend work when an invoice is a set number of days overdue. Keep hold of your deliverables, source files or licence handover until the account is up to date, but only where the contract makes that the agreed point of transfer.

Final notice, letter before action and small claims

In England and Wales, the court expects both sides to try to settle a dispute before anyone starts a claim. The Practice Direction on Pre-Action Conduct says the claimant should write to the defendant with concise details of the claim. The defendant should reply within a reasonable time: 14 days in a straightforward case and no more than 3 months in a very complex one. The court can penalise a party that ignores these steps, for example with costs orders or changes to the interest it awards (https://www.justice.gov.uk/courts/procedure-rules/civil/rules/pd_pre-action_conduct).

If your client is an individual, including a sole trader, a stricter protocol applies. The Pre-Action Protocol for Debt Claims covers any business claiming a debt from an individual. It does not cover business-to-business debts unless the debtor is a sole trader. Under it, the Letter of Claim has to state the amount of the debt and whether interest or charges are continuing, and give details of how to pay. It must also enclose a statement of account, the protocol’s Information Sheet and Reply Form, and a Financial Statement form. It should be sent by post. If the debtor does not reply within 30 days of the date on the letter, you may start court proceedings (https://www.justice.gov.uk/documents/debt-pap.pdf).

Under the debt protocol, if the debtor replies but you cannot agree, you should give at least 14 days’ notice that you intend to start proceedings. The exception is urgent cases. Your earlier reminders are separate from this: these rules are about the formal letter you send before going to court.

Making a court claim for money

In England and Wales you can apply to a county court, online or by post, to claim money a person or business owes you. This used to be called taking someone to the “small claims court” (https://www.gov.uk/make-court-claim-for-money). Claims worth up to £10,000 normally go to the small claims track (https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part26). Gov.uk also points out that mediation can be quicker and cheaper than a hearing. Scotland and Northern Ireland have their own procedures.

Fees change, so check the current table at https://www.gov.uk/make-court-claim-for-money/court-fees before you file. Notice where the bands fall. The £4,800.00 invoice from the worked example sits in the £205 band on its own. With £140.61 of interest and £70 of compensation added, the claim is £5,010.61. If the fee is worked out on that full figure, it is in the £455 band. The online service calculates the fee for you, so try both totals before deciding what to include.

Where you claim through the court for a debt that is not covered by business late-payment rules, gov.uk says the interest rate is usually 8%. Work it out the same way: yearly interest, divided by 365, multiplied by the days overdue (https://www.gov.uk/make-court-claim-for-money/work-out-interest). A judgment is not the same as being paid. If the client still does not pay, enforcement is a further step with its own costs. Weigh that before you start, especially against a client who may have no money.

Outside England and Wales the steps are similar in outline: a formal demand, then a small claims or county-level court. The limits, fees and forms vary by country, and in the US by state and county. Your local court’s website is the place to check. Do not rely on UK figures.

Collection agencies, factoring and other options

A collection agency chases the debt for you, usually for a percentage of what it recovers or a fixed fee. Some buy the debt outright at a discount. Before you sign, get the fee in writing, and ask whether you pay anything if nothing is recovered. Ask too whether the agency will take legal action in your name, and how it will treat your client. A heavy-handed agency can cost you a client relationship that might have come back.

In the US, the Fair Debt Collection Practices Act regulates third-party collectors of consumer debts. It defines a debt as an obligation of a consumer arising from a transaction primarily for personal, family, or household purposes (https://www.ftc.gov/legal-library/browse/rules/fair-debt-collection-practices-act-text). An unpaid invoice to another business is generally outside that definition. An unpaid invoice to an individual customer for household work may be inside it. That affects how an agency may contact them.

Invoice factoring solves a different problem. It does not recover a bad debt. It turns slow-paying good debts into cash now. A factoring company advances most of the invoice value and takes a fee. Say the fee is 3% of a £4,800.00 invoice: that costs £144.00, so you receive £4,656.00 in total once the client has paid, before any other charges in the agreement. If a client reliably pays at 60 days and you need the money at day 5, that can be cheaper than an overdraft. The invoice factoring cost calculator turns a factoring quote into an effective annual rate so you can compare it with other finance.

When to write off an unpaid invoice as bad debt

At some point, chasing costs more than you are likely to recover. The client may have closed down or disappeared. You may have won a judgment that cannot be enforced. The amount may simply be smaller than the time it would take to go to court. Writing the debt off means accepting that loss in your books. It does not stop you from taking the money if the client pays later.

The tax treatment depends on your accounting method, and this catches out many freelancers. The IRS says a business bad debt is a loss from a debt created or acquired in your trade or business becoming partly or totally worthless. A debt is worthless when the facts show there is no reasonable expectation that it will be repaid. The IRS also says cash method taxpayers, which includes most individuals, generally cannot take a bad debt deduction for unpaid salaries, wages, rents, fees, interest, dividends and similar items of taxable income (https://www.irs.gov/taxtopics/tc453).

The cash method result feels unfair, but it is logical. You were never taxed on money you never received, so there is nothing to deduct. The IRS says business bad debts are reported on Schedule C (Form 1040) or the applicable business return. Its small business guide covers how to handle a bad debt that is later recovered (https://www.irs.gov/publications/p334). For a sole trader, freelance tax write-offs covers what you can deduct more generally.

Other countries have their own bad debt rules, including rules on reclaiming VAT or GST already paid on an invoice that was never settled. The conditions and waiting periods differ, so check your tax authority’s guidance before you adjust a return.

How to stop invoices going overdue in the first place

Chasing is a cost, so the cheapest overdue invoice is the one that never happens. Most prevention work is done before the job starts.

Deposits and stage payments deserve most of your attention. A 50% deposit on a £6,000.00 project means the most you can lose is £3,000.00, not £6,000.00, and a client who will not pay a deposit has told you something useful. How to structure deposits and milestones is covered in invoice payment terms explained. For freelance billing models, see how to invoice as a freelancer. Ask for the deposit on the quote itself, where the estimate and quote generator prints it under the total, and give a receipt from the receipt maker for every part payment, so both sides agree on what is still owed.

Measure how you are doing, not just how you feel. Days sales outstanding tells you the average number of days it takes to collect what you bill. If that figure keeps climbing above your standard terms, your reminder schedule is not being followed, or one client is dragging the average up. Overdue invoices also tie up working capital. The cash flow forecast template shows what a 30-day slip does to your bank balance before it happens.

Finally, check the invoice itself. Some “late” payments turn out to be invoices the client’s system could not accept: wrong legal entity name, missing tax number, no PO. How to write an invoice walks through the details that stop an invoice being bounced back.

Sources

• When a commercial payment is late in the UK, and the 30-day and 60-day payment periods: https://www.gov.uk/late-commercial-payments-interest-debt-recovery
• UK statutory interest at 8% plus base rate, business-to-business only, not available if the contract sets another rate, the daily method, and sending a new invoice for interest: https://www.gov.uk/late-commercial-payments-interest-debt-recovery/charging-interest-commercial-debt
• UK fixed compensation of £40, £70 or £100 by debt size, reasonable recovery costs, and the once-per-payment rule: https://www.gov.uk/late-commercial-payments-interest-debt-recovery/claim-debt-recovery-costs
• Reference rate for statutory interest (rate in force on 30 June or 31 December): Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002, article 4: https://www.legislation.gov.uk/uksi/2002/1675/article/4
• Bank of England Bank Rate of 3.75%, held on 18 June, 30 July and 17 September 2026 (checked 21 September 2026): https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate
• Making a court claim for money in England and Wales, and mediation: https://www.gov.uk/make-court-claim-for-money
• Court fees for money claims: https://www.gov.uk/make-court-claim-for-money/court-fees
• The usual 8% court interest rate and the daily method: https://www.gov.uk/make-court-claim-for-money/work-out-interest
• Small claims track limit of £10,000, Civil Procedure Rules Part 26, rule 26.9: https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part26
• Pre-action letter and reply period (14 days in a straightforward case), ADR and sanctions: Practice Direction on Pre-Action Conduct and Protocols: https://www.justice.gov.uk/courts/procedure-rules/civil/rules/pd_pre-action_conduct
• Pre-Action Protocol for Debt Claims (business v individual or sole trader, Letter of Claim contents, 30-day reply, 14 days’ notice): https://www.justice.gov.uk/documents/debt-pap.pdf
• US definition of a consumer debt under the Fair Debt Collection Practices Act: https://www.ftc.gov/legal-library/browse/rules/fair-debt-collection-practices-act-text
• IRS Topic 453, business bad debts, when a debt is worthless, and the cash-method rule: https://www.irs.gov/taxtopics/tc453
• IRS Publication 334, bad debts for small businesses and recoveries: https://www.irs.gov/publications/p334

Where to go next

Most chasing problems start earlier, with the terms. Invoice payment terms explained covers Net 30, early-payment discounts, deposits and legal default payment periods, so your next invoice has a due date nobody can argue with. If you work for yourself, how to invoice as a freelancer covers billing models and milestone payments that keep the amount at risk small.

If a client says they “never got a proper invoice”, how to write an invoice lists what one must include. Invoice vs receipt vs quote explains when a credit note or statement of account is the right document to send.

Common questions