23/09/2025

I have written several articles in the past asking directors and business owners to stay ‘protected’ before entering into contracts. As a litigator, I would always advise that you protect your business against non-payment of invoices.

To do this, you should start by asking yourself a couple of key questions:

• Do your terms and conditions protect your business if the invoices you issue are not paid?
• Do you have a credit control system in place?

I have heard over many years businesses say that their payment terms are 30 days, but 30 days from what? Some businesses say it is 30 days from the date of the invoice, others say it is 30 days from month end and others say it is 30 days from when the invoice is approved by the financial director. This difference of opinion is exactly why you must set out very clearly your terms in your terms and conditions of business.

When should terms and conditions be issued?

This is a critical point that so many people get wrong.

Terms and conditions should be issued to your customer at the start of your relationship with them before a contract is formed or when an order takes place. This enables customers to make an informed decision before they make a purchase or agree to a service.

Don’t rely on putting your payment terms on your invoices. This is post-contract, so has no effect.

Interest and contractual costs clauses

All businesses must have within their terms and conditions an interest clause. A lot of businesses refer to interest, for example, stating that it will be charged at 4% above the Bank of England Base Rate, but without having a contractual cost clause for recovery. Let me explain…

If you instruct a solicitor or a debt management company to collect your outstanding debts, your reasonable legal costs of recovery should be claimable against the debtor company. Without a contractual clause in place, these costs may not be recoverable in full.

The Late Payment of Commercial Debts (Interest) Act 1998 offers suppliers statutory interest at a current rate of 12.25%. This is rarely used. In addition, under The Late Payment of Commercial Debts Regulations 2002, you can claim compensation under each outstanding invoice on a sliding scale from £40 per invoice up to £100 per invoice. Further, under The Payment of Commercial Debts Regulations 2013 you can claim your reasonable costs back under this legislation.

Businesses must remember that many contracts that they enter into include express terms (late payment, interest and costs) which excludes or dilutes the statutory remedies.

Should you pursue customers or clients who don’t pay?

I often receive feedback from clients who are reluctant to pursue claims fearing that doing so will sour commercial relationships. I frequently hear people say, “But they are good customers”.

No, they are not! If they were good customers, they would pay within the terms. This is your money and payment must be made as agreed.

Need help to recover money owed to you through unpaid invoices?

If you need help to recover money that you are owed or to tighten up your terms and conditions or credit control system, please get in touch with our debt recovery experts by emailing debtrecovery@beswicks.com or phoning our Stoke-on-Trent solicitors on 01782 205000 or our Altrincham solicitors on 0161 929 8494.