Late payment is best prevented at onboarding by using direct debit (e.g. GoCardless), monthly fixed billing, and an engagement letter that sets payment terms and stop-work triggers. When invoices are late, follow a structured escalation: friendly reminder, formal reminder with statutory interest notice, suspension of work, and finally formal recovery. Avoid emotion, document everything, and keep your professional body's ethical guidance in mind throughout.
Prevention beats cure
Most late-payment problems are designed in at the start of the relationship. Reduce them by:
- Charging by direct debit: services like GoCardless or Stripe Direct Debit collect monthly retainer fees automatically. UK adoption among small accountancy practices is high and rising.
- Billing monthly, not annually: spreads the cash flow, makes mid-year fee changes simpler, and reduces the cost of any single non-payment
- Setting clear payment terms in writing: 14 days is typical for one-off project invoices; on-receipt or first-of-month for retainers
- Including a stop-work clause: in your engagement letter, state that work will be suspended after 30 days of overdue invoice
- Taking a deposit on first engagements: 50% upfront for projects, first month's retainer in advance
The escalation ladder
Even with strong prevention, some invoices will go unpaid. Use a clear, repeatable escalation:
Day 1 to 7 after due date: friendly reminder
A short, polite email reminding the client the invoice is overdue. Often the client genuinely forgot or the email went to spam. Include a direct payment link.
Day 14: second reminder, more formal
Reference the engagement letter's payment terms, attach a statement of account, and offer to discuss any concerns. Begin a paper trail.
Day 21 to 30: formal demand and pause warning
A formal written demand referencing your engagement letter, the right to charge statutory late payment interest under the Late Payment of Commercial Debts (Interest) Act 1998 if applicable, and a notice that work will be suspended unless the invoice is paid by a stated deadline.
Day 30+: suspend further work
Pause non-urgent work in writing. Continue to comply with your professional ethical duties (e.g. critical filings on which the client could otherwise be prejudiced should usually be flagged with appropriate notice).
Day 60+: formal recovery
Options include:
- Engaging a debt recovery agency
- Issuing a Letter Before Action and proceeding to Money Claim Online (small claims) for amounts up to £10,000
- Considering disengagement (see also our guide on how to sack a client)
Statutory interest and compensation
Where the late payment relates to a commercial transaction (B2B), the Late Payment of Commercial Debts (Interest) Act 1998 entitles you to:
- Statutory interest at the Bank of England base rate plus 8%
- A fixed late-payment compensation amount that scales by debt size
- Reasonable recovery costs over and above the fixed compensation
You do not need a specific contractual provision to charge statutory interest, although you can also include your own contractual interest rate in the engagement letter.
Working with longstanding clients who are struggling
Some clients fall behind because of genuine financial difficulty rather than sharp practice. Options worth considering:
- A short-term payment plan (in writing, with a clear end date)
- A temporary reduction in scope until the client is back on track
- Honest conversation about whether the relationship can continue at the current price
- Stop-work suspension while the position is reviewed
Document all variations to the engagement.
Accountants in some circumstances have a particular lien over client documents for unpaid fees, but the rules are complex and limited (and you must not retain documents that the client is legally entitled to). ICAEW, ACCA and AAT all publish guidance on the use of liens; check your body's current rules before withholding any document, particularly statutory records.
Ethical and professional considerations
- Do not threaten action you are not prepared to take
- Do not breach client confidentiality or AML "tipping off" rules in any communications
- If the client raises a complaint, follow your firm's complaints procedure
- If a dispute arises about fees, your professional body's bye-laws and a formal disengagement may be required
Key Takeaways
- Most late-payment problems are prevented at onboarding via direct debit, monthly retainers and clear engagement letters
- Use a structured escalation ladder: friendly, formal, demand, suspend work, formal recovery
- Statutory interest and fixed compensation under the 1998 Act apply to commercial late payments
- Use payment plans cautiously and document all variations
- Follow professional body guidance on liens, ethics and disengagement
Frequently asked questions
Can accountants charge interest on late payments?
Yes. Statutory interest at base rate plus 8% applies to B2B late payments under the Late Payment of Commercial Debts (Interest) Act 1998, plus a fixed compensation amount. You can also include a contractual interest rate in your engagement letter.
Can I stop work for a non-paying client?
Yes, provided your engagement letter allows it (which it should). Continue to comply with professional ethical duties, particularly to avoid leaving the client unable to meet a critical filing deadline.
How do I escalate to small claims?
Send a Letter Before Action giving the client a final 14 days to pay. If unpaid, file via Money Claim Online (HM Courts) for amounts up to £10,000. Above that, the County Court process is more involved.
Do I have to release client records to a non-paying client?
Generally yes, although there are limited circumstances in which a particular lien may apply. ICAEW, ACCA and AAT publish detailed guidance; do not withhold statutory records or documents that the client is legally entitled to without specific advice.
What is the best software for collecting accountancy fees?
GoCardless is widely used by UK accountants for direct debit on retainers. Stripe is popular for one-off invoice payments. Both integrate with Xero, QuickBooks and most practice management tools.