Getting Paid On Time

A late invoice is not a cash flow inconvenience. It is a direct, pound-for-pound reduction in your runway, and it happens to be one of the few problems in a startup where the law is unambiguously on your side and most founders never use it.

You have a statutory right to charge interest and a fixed fee on overdue business invoices. It applies automatically. You don't need it written into your contract, and the other side doesn't have to agree to it.

Figures are from GOV.UK and the Bank of England, checked in July 2026. The base rate moves, so recalculate before you invoice.

When a payment is legally late

This is the bit worth knowing precisely, because "late" has a legal meaning and it's probably earlier than you assume.

If you agreed a payment date, it must normally be within 30 days for public authorities or 60 days for business-to-business transactions. You can agree longer than 60 days between businesses, but the term has to be fair to both sides — a large customer can't simply impose 120-day terms and call it agreed.

If you never agreed a date at all, the law fills the gap for you: payment is late 30 days after the customer receives the invoice, or 30 days after you delivered, whichever is later. So an invoice with no stated terms is not open-ended. It has a deadline whether anyone wrote one down or not.

Source: GOV.UK — When a payment becomes late

What you can actually charge

Two separate things, and you can claim both on the same invoice.

Worked example. A £12,000 invoice, 45 days overdue, at 11.75%. The annual interest is £1,410, which is £3.86 a day, so 45 days gets you £173.84. Add the £100 fixed charge and you're owed £273.84 on top of the invoice. Not life-changing, but it isn't nothing — and the point is mostly what it signals.

Sources: GOV.UK — Interest on late commercial payments · GOV.UK — Claim debt recovery costs

Why founders don't charge it

Almost always the same reason: the customer is important and nobody wants to sour the relationship over £273. That's a real concern and it's worth taking seriously rather than dismissing.

But there's a middle path that costs you nothing. Put the statutory position on the invoice itself — a single line noting that overdue amounts are subject to statutory interest at 8% above base rate under the Late Payment of Commercial Debts (Interest) Act 1998. You are not threatening anyone. You are stating the law, which applies whether or not you print it.

In practice that line tends to get invoices routed differently inside a finance department. It reads as a company that tracks its receivables, and those get paid before the ones that don't.

The things that actually shorten payment times

Interest is the backstop. Most of the improvement comes earlier, from removing the excuses before they're available.

• Invoice the day you deliver. A surprising number of small companies invoice in a monthly batch, which quietly adds up to two weeks to every payment before the clock even starts.
• Find out who actually pays. The person who bought from you is often not the person who processes the invoice. Ask for the accounts payable contact at the point of sale, not at the point of chasing.
• Ask what they need on the invoice. Larger organisations reject invoices for missing purchase order numbers, and the rejection frequently isn't communicated. You find out weeks later when you chase.
• Chase before it's due, not after. A short note a few days ahead of the due date confirming everything is in order is administrative rather than confrontational, and it catches problems while there's still time.
• Take card or direct debit for smaller amounts. The processing fee is usually less than the cost of the cash arriving five weeks later, and considerably less than the cost of chasing it.

What this does to your runway

Here's the part that connects to the rest of this site. If you invoice £20,000 a month and your customers pay at 60 days rather than 30, you are permanently carrying an extra £20,000 of your own cash inside someone else's business. That money is on your balance sheet as a receivable and it is completely useless to you for making payroll.

Founders often model runway on invoiced revenue rather than collected cash. That's the mistake. When you use the runway calculator, put in the cash actually in your bank account, not the cash you have theoretically earned. The gap between those two numbers is exactly the size of the problem, and shrinking your payment terms by 30 days is one of the few ways to get a large one-off cash injection without raising anything or cutting anything.

If the amount is large and the customer has simply stopped responding, the small claims track exists for this and you don't need a solicitor to use it. Below £10,000 the costs are modest and the process is designed to be navigable by people who aren't lawyers.

Usual caveat: I'm a developer, not a solicitor. The GOV.UK pages linked above are the authority on all of this, and anything involving a contract you've actually signed is worth a proper opinion.