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Late payment and the working-capital squeeze: the follow-through
We have already set out the statutory rights a business has when a commercial customer pays late — interest at 8% above the Bank of England base rate, plus fixed compensation of £40, £70 or £100 depending on the size of the debt. Knowing the rights, though, is only step one. This follow-up is about the follow-through: what a company actually does, in order, when money it is owed has not arrived and the working-capital gap starts to bite. It is general information for directors of UK companies, not legal or financial advice.
Step one: make the invoice hard to ignore
Most late payment starts before the due date, in a vague invoice. A clean invoice states the amount, the work, a specific due date, the payment method, and a short line noting that statutory interest and compensation apply to late commercial debts. None of that is aggressive; it is simply removing every excuse for delay. Invoice promptly rather than in monthly batches, send it to a named person who can actually pay it, and confirm receipt. A surprising share of “late” payments are invoices that were never properly received in the first place.
Step two: a chase sequence, not a chase
Chasing works best as a defined sequence rather than an occasional, emotional phone call. A workable pattern is a polite reminder a few days before the due date, a firmer note on the day it falls due, and a clear written notice shortly after — the notice being where you state that the debt is now late and that statutory interest and compensation are accruing. Keeping the sequence consistent across every customer takes the awkwardness out of it: you are not singling anyone out, you are applying the same process to everyone, and the paper trail is doing the work.
Step three: put a figure on the delay
Once a debt is genuinely late, the statutory entitlements are concrete, not notional — so quote the actual number. The operator’s late-payment interest calculator applies the 8%-above-base-rate interest and the fixed-compensation band for you, turning a vague grievance into a precise, defensible figure you can put in the notice. A customer who sees that late payment carries a real, itemised cost tends to move it up the queue; a figure focuses a conversation in a way that a reminder never does.
Step four: bridge only if the timing genuinely demands it
Asserting your rights does not make the cash arrive today, and sometimes the timing is the whole problem: payroll, a VAT deadline or a supplier bill lands before the late debt clears. That is the narrow situation where short-term working-capital finance earns its place — to bridge a specific, dated gap between work done and money in, not to prop up a business that is structurally short of cash. We have written separately on working capital versus a term loan and, just as importantly, on when not to borrow. The honest test is simple: can you point to the incoming payment that repays the bridge, and the date it lands? If yes, a short bridge can be the right tool. If no, borrowing is treating a symptom.
The company-only perimeter
If a bridge is the right answer, note who the borrower is. Credicorp Limited lends to UK incorporated businesses only — the company is the borrower, not a director personally — and does not take a personal guarantee. That perimeter, and why body-corporate lending sits outside the FCA’s consumer-credit rules, is set out on the lending and regulation page.
The honest summary
Late payment is one of the most common causes of a working-capital squeeze, and the follow-through matters as much as the rights. Invoice cleanly, chase in a consistent written sequence, quote the statutory figure once a debt is late, and bridge the gap only when you can name the payment that repays the bridge. Do the first three well and you will need the fourth far less often — which is exactly the order of priorities a responsible lender would want you to keep.