I chase invoices for a living. Here’s how to get paid without taking your client to court

In the UK, a business goes out of operation every 40 minutes due to unpaid work, with late payments costing the economy £11 billion annually. The problem extends to Europe, where the EU Payment Observatory estimates that addressing this issue could generate an additional €100 billion in cash flow yearly. Large companies tend to delay payments, stretching terms to 60, 90, or even 120 days to bolster their own cash flow.

This puts small businesses at a disadvantage, as they are less capable of absorbing the financial strain and struggle to secure loans, seeing their irregular cash flow as a risky investment. Delays become a form of finance for suppliers, effectively providing interest-free loans they never agreed to. Consequently, business owners spend an average of 86 hours per year tracking down unpaid invoices.

Artificial intelligence is making debt recovery more affordable, as demonstrated by a UK freelancer who recovered a £7,000 unpaid invoice in June using an AI lawyer, at a cost of just £400. However, significant change won't happen immediately. Founders can take practical steps to mitigate the impact of late payments. Clearly state payment deadlines, specify the required invoice format, and include penalties for late payments in contracts.

Ensure the client has signed the Fair Payment Code, which recognizes companies for good payment behavior. To avoid ambiguity, confirm that all information, such as the correct recipient and purchase order number, is accurate and available. Send invoices promptly and personalize the relationship with clients by getting to know their accounting staff.

Chasing payments becomes easier when done with a friendly call. Instead of penalizing late payers, reward early payers by offering a small discount, such as 1-2%, for payments made within the first week. This shifts the focus to the client's gain rather than your loss. If a client routinely pays late, despite agreeing to an earlier deadline, they may not be a reliable partner.

Sometimes, it's best to end the business relationship. Late payments can be frustrating and distracting, pulling founders away from growing their business. While these steps won't completely balance the power dynamic, they'll make it more challenging for clients to stall payment while legal action is taken.