Late payments are a common frustration for construction firms—and they can seriously affect your cash flow and ability to keep projects moving. Whether you’re working with private clients or subcontracting for a larger contractor, having a clear, proactive system for invoicing and follow-ups is essential to getting paid on time.
In this guide, we’ll walk you through practical ways to prevent non-payment, implement reminders, and recover overdue balances without damaging client relationships.
Set Clear Payment Terms from the Start
Before any project kicks off, make sure payment terms are outlined in writing. This includes:
- A payment schedule (e.g. deposit upfront, staged invoices)
- Late payment penalties or interest rates
- Preferred payment methods
- Expected turnaround time for payment (e.g. 14 or 30 days)
Well-structured contracts not only set expectations but give you legal backing if disputes arise.
Automated Email Reminders Work Wonders
Instead of manually chasing clients, let software do the heavy lifting.
Cloud-based accounting systems like Xero, Sage, and QuickBooks let you:
- Automate email reminders before and after payment is due
- Customise the tone and timing of your messages
- Track when an invoice has been viewed
This creates a professional impression and often prompts faster payments—without the awkward phone calls.
When a Payment Is Late: Step-by-Step Process
If the invoice due date passes and payment hasn’t arrived, follow this structured approach:
Step 1: Friendly Follow-Up (Day 1–3 overdue)
A courteous reminder—often, it’s a simple oversight.
Step 2: Formal Written Reminder (Day 7–10 overdue)
Reference the agreed payment terms. Attach the original invoice and request payment by a specific date.
Step 3: Enforce Late Payment Charges (If applicable)
If your contract includes penalties or interest, now’s the time to apply them.
Step 4: Pause Work or Deliverables (If necessary)
For ongoing projects, you may suspend work until payment is received—provided your terms allow it.
If It Comes to It: Debt Recovery Options
For persistent non-payers, consider escalation:
- Solicitor’s Letter: A formal letter from a lawyer often prompts payment without legal proceedings.
- Debt Collection Agency: Fees vary, but some work on a no-win, no-fee basis.
- County Court Claims: You can pursue unpaid debts through the County Court.
- Small Claims Track: For debts under £10,000.
- Fast Track: For claims between £10,000 and £25,000.
- Multi Track: For complex cases or debts over £25,000.
We recommend assessing the cost, time, and relationship value before taking legal action.
How Co-gency Helps Construction Firms Get Paid
At Co-gency Chartered Accountants, we help you:
- Set up accounting software with automated invoicing and reminders
- Draft clear, enforceable payment terms
- Monitor your cash flow and debtor days
- Stay compliant with CIS, VAT Reverse Charge, and more
If you’re struggling with late payments, we’ll work with you to streamline your systems and take the stress out of getting paid.
Conclusion
Late payments don’t need to be part of doing business. With automation, structure, and the right support, you can protect your cash flow and focus on what you do best—delivering great work.
Explore more support for builders and contractors on our Construction Accounting Services page.
At Co-gency Chartered Accountants, we specialise in helping builders, developers, and contractors manage their finances and stay compliant with HMRC.
From CIS returns to cash flow forecasting and VAT reverse charge management, our team understands the challenges unique to your industry. We’ve supported construction firms across Salford and Swinton for over 30 years.
📞 Book a free consultation today and discover how we can help your business stay cash flow positive—even when projects get tough.