3 min read
Why a written sequence matters
Chasing payment verbally leaves no audit trail. A written sequence — first reminder, second notice, final demand — documents that you gave the debtor reasonable opportunity to pay before you escalated. Courts and collection agencies will ask to see this record, so the letters serve a dual purpose: they prompt payment and they build your legal position.
Under the Late Payment of Commercial Debts (Interest) Act 1998, once an invoice is overdue between businesses, statutory interest accrues automatically. You do not need to mention this in the first reminder, but referencing it in the final demand adds legitimate pressure without misrepresentation.
First reminder — polite and factual
Send the first reminder on the day after the due date, or within two to three days. Keep the tone neutral. Include the invoice number, original due date, amount outstanding, and your payment details. Many late payments at this stage are administrative oversights, and an aggressive opening letter can damage a profitable relationship unnecessarily.
- Subject: Invoice [number] — payment now due
- State the exact amount and due date
- Attach a copy of the original invoice
- Provide bank details and reference
- Set a clear response deadline (seven days is standard)
Second notice — firmer, with interest calculation
If payment has not arrived within the period specified in your first reminder, send a second notice. At this stage it is appropriate to calculate and state the statutory interest that has accrued, and to mention the fixed debt recovery compensation you are entitled to claim. This is not a threat — it is a factual statement of your legal position.
Include a revised total (original invoice amount plus accrued interest plus compensation) and give a further deadline, typically seven to ten days. Indicate that failure to pay will result in the matter being referred for formal recovery.
Final demand — letter before action
The final demand, sometimes called a Letter Before Action (LBA), should be sent by recorded delivery or email with read receipt. It must state clearly that you intend to issue county court proceedings or instruct a commercial debt collector if payment is not received within a specified period — fourteen days is the pre-action protocol standard for business debts.
Keep the language formal but factual. Do not make statements you are not prepared to act on. If you issue the LBA, be prepared to follow through: an empty final demand trains debtors to ignore future correspondence.
Adapting the template to your terms
If your contracts specify payment terms different from the statutory thirty-day default, reference those contractual terms in each letter rather than the statutory default. Where your contracts include a specific interest clause, use that rate instead of (or in addition to) the statutory rate — check which is higher and which applies under your agreement.
For recurring late payers, consider whether your credit terms need updating. A credit check before onboarding can flag risk before it becomes a collection problem.
Frequently asked questions
Can we charge statutory interest without including it in our original contract?
Yes. The Late Payment of Commercial Debts Act 1998 implies a right to charge 8% above the Bank of England base rate on overdue B2B invoices even where the contract is silent. You can include or waive this in your demand letters at your discretion.
Does sending a letter before action commit us to court proceedings?
No, but it signals serious intent. Pre-action protocols require you to give the debtor a reasonable opportunity to respond before issuing a claim. If you issue an LBA routinely without following through, its deterrent value diminishes over time.
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