How to get paid faster: deposits, payment terms and late payment rules

Late payment is one of the biggest pressures on small businesses. Most of it can be prevented before the work starts, with clear terms, a deposit and making it easy to pay.

1. Agree terms before you start

Put payment terms in the proposal or agreement the client signs, not in the first invoice. Spell out:

• the amount and what it covers;
• when each payment is due (on signing, at milestones, monthly);
• the payment period for invoices, for example 14 or 30 days;
• how the client can pay;
• what happens if payment is late.

2. Take a deposit

A deposit on signing confirms commitment, funds the start of the work and reduces your exposure if the project stops. For larger projects, split the rest into milestones tied to deliverables, so you’re never far ahead of what you’ve been paid.

3. Make paying easy

Every extra step delays payment. Give clients a payment link with the invoice, accept card for smaller amounts, and offer Direct Debit for recurring fees so payments are collected automatically. Taking the deposit at the moment the client signs is the easiest of all, since they’re already saying yes.

4. Invoice promptly and clearly

Send invoices as soon as they’re due. Include your business details, the client’s details, a unique invoice number, the date, what the invoice is for, the amount, any VAT, the due date and how to pay. A clear invoice is easier to approve.

5. Remind, politely and on schedule

A friendly reminder a few days before the due date, another on the day and regular follow-ups afterwards will clear most late payments. Automating them keeps them consistent and saves awkward conversations.

6. Know your rights (UK)

For business-to-business debts in the UK, the Late Payment of Commercial Debts (Interest) Act 1998 lets you claim statutory interest at 8% above the Bank of England base rate on late payments, plus fixed compensation for the cost of recovering the debt:

• £40 for debts under £1,000;
• £70 for debts from £1,000 to under £10,000;
• £100 for debts of £10,000 or more.

If no payment period is agreed, payment is due 30 days after the invoice or delivery, whichever is later. You don’t have to use these rights, but mentioning them in your terms often encourages prompt payment. For consumers, different rules apply.

This is general information, not legal or financial advice.

Frequently asked questions