Late payment is on the rise – but can be reduced significantly with these simple steps

11/12/2025

The problem of late payment remains a significant challenge for small and medium-sized enterprises (SMEs), with recent data painting a stark picture of the financial strain businesses endure. 

SMEs are typically owed tens of thousands of pounds in overdue invoices. Analysis by Sage/CEBR in May 2025 found the smallest businesses are, on average, owed a staggering £42,000 in late payments, while a March 2025 Intuit QuickBooks report placed the figure at over £21,000 for affected firms.

The prevalence of this issue is widespread, with studies estimating that up to 90% of UK companies have experienced late payments in the past year. 

Despite the gravity of the situation, analysis of recent studies reveals a complex landscape of underlying causes and potential solutions. From customers simply forgetting to pay, to more serious cash flow issues, understanding the reason for the delays can be crucial for developing effective strategies to combat this persistent problem.

By adopting a few simple steps as part of your credit control process, this excuse for late payment can be significantly reduced:

1. Call a few days before the invoice is due

It is good credit control practice to contact your customers a few days before your invoice is due for payment. This serves to remind them in case they have forgotten or misplaced your invoice. It can also push your invoice to the top of the pile as, if they are experiencing cash flow problems and have a number of invoices to pay, the fact you’ve shown you have a robust credit control process in place means they’ll be more likely to pay yours ahead of others, rather than run the risk of being chased for payment as soon as it’s overdue.

2. Call earlier in the credit period

It is also good practice to call a week or two after sending the invoice to your customer. Not only does it provide the opportunity for the customer to confirm receipt and mention any disputes which could affect payment, you can also use this call to confirm the due date of the invoice in case it has been lost or misplaced.

3. Automate credit control emails

Where possible, it can be beneficial to automate this communication, reducing the resource burden on your team. Outsourcing to a specialist credit control agency can also be incredibly beneficial, both to improve performance and efficiency and to give you more time to focus on growing your business. Read more about the benefits of outsourced credit control here.

4. Call as soon as an invoice is overdue

Most important of all is to contact your customer as soon as an invoice is overdue. If they have genuinely forgotten to pay, this will prompt them to do so. If they have any issues, these can be discussed and addressed there and then and a way forward agreed.

Read: Credit control timeline: 8 steps to collect payment from customers

Knowing your customer

Often, the reason for late payment is that the customer is experiencing cash flow issues.

This trend appears to be growing, as buyers’ financial difficulties are now a key driver of payment delays for some businesses. Rising interest rates and inflation have placed a greater strain on businesses of all sizes. The Insolvency Service reported that company insolvency numbers increased to a 30-year high in 2023, and while the total for 2024 was slightly lower, numbers in 2025 so far are at a similar level to the 2008/09 recession. 

Ensuring you’re only selling to creditworthy businesses is therefore paramount. Here are a few tips to help:

1. Credit check all new customers

Before deciding to sell to another business there are a few important questions you should be asking. Are they paying other suppliers on time? How are they performing financially? Do they have a good credit rating? Credit checks provide much of this information for a small cost, but one that is well worth the peace of mind. Any prospective customers with a poor credit history or rating should be viewed with caution, with either more attention dedicated to those accounts or potentially pro-forma payment requested.

2. Ask customers to complete an account opening form

It’s also important for customers to complete opening forms, which enable you to capture key information about the business. This ensures the company is bonafide, assists with your credit checks, and also provides the information you’ll need to contact them throughout the credit period and in the event they fail to pay on time.

3. Keep in touch with customers throughout the credit period

Contacting customers at key points in the credit period provides them with the opportunity to let you know of any cash flow issues they may be facing. Whilst enabling you to work together to agree a way forward, you’ll also gain the time to adjust your own cash flow projections in case their late payment will have an adverse impact on your company.

4. Act as soon as the invoice is overdue

As above, always act as soon as an invoice is classed as overdue. The likelihood of recovering an invoice in full reduces the longer it is overdue, and this is especially so with customers who are facing cash flow or financial difficulty.

Read: 8 questions you should be asking every customer

Adverse impacts

Late payments have a profound and detrimental impact on UK SMEs, affecting everything from daily operations to long-term survival. The consequences are far-reaching: 

• Business closures: An estimated 14,000 businesses close each year as a direct result of overdue invoices, according to research from the Small Business Commissioner (SBC) and the Federation of Small Businesses (FSB).
• Cash flow: The issue creates an ongoing cash flow crisis, impacting a business’s ability to pay their own suppliers and staff.
• Resource drain: Small businesses waste an average of 86 hours annually just chasing overdue payments, a figure cited in various reports from the SBC, FSB, and government research.
• Stifled growth: Late payments are a real barrier to businesses achieving their full potential and investing in future growth.
• Personal toll: The problem takes a significant toll on owners’ personal finances and mental health, with some reporting having to dip into personal savings to keep the business afloat. 

If your business is being affected by late payment, Hilton-Baird Collection Services can help. Our award-winning range of debt collection and credit control services are designed to help our clients get paid faster, whilst easing the resource burden that credit control can have.

Click here to read about some of the ways we can help, or call us on 0800 9774848 or request a call back to discuss your requirements with our experienced team.