Best practices to minimise late payment impacts

Late payments are a reality for many businesses, but their impact can be minimised with strong preventive measures. The key lies in building solid foundations in invoicing, credit control, and client relationships.

• Accurate and timely invoicing

Invoices should be clear, accurate, and easy to process. Include purchase order references, itemised charges, tax details, payment terms, due dates, and accepted payment methods. Send them promptly once goods are delivered or milestones completed, and confirm receipt with the customer’s accounts team. A well structured invoice leaves little room for excuses and speeds up approval. 

• Automated systems track invoice status, send reminders, and escalate overdue notices at set intervals

Technology can take much of the strain. Friendly nudges before the due date, firm notices on the day, and sharper follow ups afterwards create a consistent rhythm. Delivery confirmations, read receipts, and dispute logs help spot recurring issues and drive improvements. 

• Strong client relationships also make a difference

Set payment expectations during onboarding, share billing calendars, and clarify approval paths. Regular reviews with key accounts keep communication open, resolve bottlenecks, and update contacts. Incentives for early payment or tailored terms for habitual late payers can encourage better behaviour, provided they are balanced against credit risk. 

• Contracts remain a powerful safeguard

Clauses on interest or late fees signal seriousness and discourage casual delays. Legal protections strengthen a company’s position if disputes escalate. Flexibility can also ease pressure without undermining control.  

• Having trade credit insurance can significantly reduce late payments

It not only provides a prior assessment of a customer’s creditworthiness, but also acts as a deterrent. Many companies are reluctant to delay payments to insured suppliers, knowing that doing so could trigger involvement from the insurer or lead to a reduction in their own credit limits. In practice, this creates a discipline effect: clients understand that failing to pay on time carries wider consequences, making them more likely to settle invoices promptly. 

• Other smart practices include aligning billing cycles with customers’ payment runs, offering multiple payment options, and establishing clear escalation protocols

Credit risk tools help monitor exposure, while trade credit insurance provides a safety net against non payment, allowing businesses to grow with confidence even when partners face temporary constraints.

How can I communicate with clients about overdue invoices? 

Even with the strongest preventive measures in place, late payments can never be eliminated entirely. Markets shift, clients face internal delays, and unexpected disputes arise. The reality is that some invoices will slip through, which makes it essential not only to prepare but also to have a clear strategy for managing overdue accounts when prevention is no longer enough. 

Chasing overdue invoices is never pleasant, but the way you communicate can make all the difference. The aim is to remain clear, respectful, and professional while leaving no room for ambiguity. Begin by acknowledging the relationship and stating the facts succinctly. Resend the invoice and remittance details, and confirm that the client has received them. 

Always ask for a specific commitment date and check the approval status. If necessary, request the name of the approver to ensure accountability. When disputes arise, ask for supporting documentation and agree on a resolution timeline, while encouraging payment of any undisputed amounts in the meantime. For clients facing cash constraints, partial payments or short term plans with clear milestones can ease pressure, provided they are documented and monitored. 

Every conversation should be followed up with a concise email that summarises the call, confirms agreed actions, and sets deadlines. Consistency is vital: templates help maintain clarity and a professional tone across all interactions. Calls benefit from a simple script—state the purpose, confirm invoice details, ask for a commitment date, clarify approval status, address disputes, and agree next steps before confirming them in writing. 

Professionalism is key throughout. Avoid blame, stick to documented facts, and match tone to the situation, whether it’s administrative oversight, a genuine dispute, or a request to push payment into the next run.  

What are effective strategies for following up on late payments? 

Consistent follow up is the backbone of effective credit control. To turn commitments into cash, businesses need a structured cadence of reminders: the first on the due date, the second at seven days overdue, a third at 14 days with a manager copied, and a formal notice at 21 days. Each step should be progressively firmer, while remaining professional. Messages must be factual and precise, referencing the invoice number, amount, due date, and requested payment date. Confirm whether any disputes exist, capture commitments in writing, and keep the process outcome focused. 

Communication works best when channels are combined. Emails provide a documented trail, while phone calls uncover obstacles quickly. After every call, send a summary email confirming agreed actions and deadlines. A practical call outline includes introducing yourself and the purpose, confirming invoice details, asking for a specific payment date, clarifying approval status and payment run timing, addressing disputes, and agreeing next steps before confirming them in writing. 

If commitments fail, escalation is essential. Internally, involve sales or account management; externally, copy managers and then finance leaders, always including a concise timeline of previous contacts. Where risk increases, consider tightening credit terms or pausing new orders until arrears are resolved, in line with your credit policy. Flexibility can help in certain cases. Partial payments or short term plans may ease pressure, but these must be documented and carefully managed. 

Credit exposure should be reviewed regularly. If payment behaviour deteriorates, adjust terms or limits to protect your position. Risk mitigation tools, such as trade credit insurance, add another layer of security and provide confidence to continue trading even when delays occur. 

Finally, be prepared for the excuses that often accompany late payments. Whether it’s internal approvals or requests to push invoices into the next payment run, anticipate these scenarios and respond with clarity and firmness. A structured, consistent process not only speeds up recovery but also reinforces the message that timely payment is non negotiable. 

To explore how to strengthen your own credit risk strategy, get in touch with us and see how we can help you stay ahead.