Chasing an outstanding invoice is one of the most frustrating aspects of running a business. In the construction industry, where project timelines are tight and cash flow is king, a single unpaid invoice can have a significant domino effect. 

It can delay payments to your own suppliers, disrupt payroll, and halt progress on other jobs. You’ve completed the work, met your obligations, and now you’re left waiting. It’s a common problem, but that doesn’t make it any less stressful.

The great news is that you do have options. Dealing with outstanding invoices is a skill, and like any skill, it can be learned and refined. This guide provides a clear, actionable roadmap for construction businesses to navigate the choppy waters of late payments. 

Running a business in the modern day is difficult enough without the stress of unpaid invoices. It is always better to spend your time focusing on new projects and acquiring new clients without the stress of having to become an unofficial debt collection agency

We will walk you through the essential first steps you can take yourself, explore when to escalate the matter, and explain why professional help is often the most effective route to getting your money back in your account, where it belongs.

The Foundation: Preventing Late Payments from the Start

Before we dive into chasing debt, it’s worth noting that the best defence is a good offence. Strong foundations in your invoicing process can prevent many payment issues from ever arising. A clear and professional system shows clients you are serious about payment from day one.

Set Clear Payment Terms

Your payment terms should be unambiguous and agreed upon before any work begins. This is a critical part of your contract. Make sure the following are clearly stated:

• Invoice Due Date: Specify the exact number of days for payment (e.g., “Payment due within 30 days of invoice date”). Avoid vague terms like “upon receipt.”
• Payment Methods: List all the ways a client can pay you (BACS, card payment, etc.). Make it as easy as possible for them to settle the bill.
• Late Payment Penalties: Under UK law, you are entitled to charge interest on late commercial payments. The Late Payment of Commercial Debts (Interest) Act 1998 allows you to claim interest, currently at 8% plus the Bank of England base rate. Mentioning this in your terms can be a powerful motivator for on-time payment.

Issue Clear and Accurate Invoices

An invoice is a formal request for payment. Any confusion or error on it gives the client a reason to delay. Ensure every invoice you send includes:

• Your company name, address, and contact details.
• The client’s name and address.
• A unique invoice number.
• A clear description of the work completed or materials supplied.
• The date the invoice was issued.
• The total amount due, including a breakdown of VAT if applicable.
• Your payment terms and how to pay.

Double-check every detail before sending. A simple typo in the amount or a missing purchase order number can lead to weeks of delays while it gets sorted out.

Stage 1: The Initial Chase for an Outstanding Invoice

When an invoice passes its due date, it’s time to act. Don’t feel awkward about it; this is your money for work you have delivered. A professional and persistent approach is key.

The Gentle Reminder (1-7 Days Overdue)

Your first step should be a polite and friendly follow-up. It’s possible the invoice has simply been overlooked, misplaced, or is sitting in someone’s inbox awaiting approval.

A simple email or a quick phone call is often all it takes.

Email Template:

• Subject: Reminder: Invoice [Invoice Number]
• Body: “Hi [Client Name], Hope you are well. This is a friendly reminder that invoice [Invoice Number] for £[Amount], which was due on [Due Date], is now slightly overdue. I’ve attached a copy for your convenience. Could you please let me know when we can expect to receive payment? Many thanks, [Your Name].”

This non-confrontational approach maintains a good client relationship while clearly stating the issue.

The Firm Follow-Up (8-21 Days Overdue)

If a week or two passes with no payment and no response, it’s time to be more direct. Your tone should remain professional but become firmer. The goal is to understand the reason for the delay and get a concrete commitment for payment.

A phone call is often more effective at this stage than an email. It’s harder to ignore a direct conversation.

During the call:

1. State the reason for your call: “I’m calling about an outstanding invoice, number [Invoice Number], which is now [Number] days overdue.”
2. Ask for an update: “I was hoping to get an update on when payment will be made.”
3. Listen to their reason: There might be a legitimate issue, such as a dispute over the work or an internal cash flow problem. Understanding the cause helps you decide on the next step.
4. Secure a payment date: Don’t end the call without a specific date. “Can you commit to making the payment by this Friday?” is much better than “Can you pay it soon?”
5. Follow up in writing: After the call, send an email confirming the agreed payment date. This creates a written record.

If there is a dispute about the work, address it immediately. Provide evidence like signed-off work sheets or project completion certificates to resolve the query quickly.

Stage 2: Escalating the Matter

If your initial reminders and follow-ups are ignored, and the outstanding invoice is now a month or more overdue, you need to escalate your efforts. This signals to the debtor that you will not let the matter drop.

The Final Demand Letter

This is a formal communication that should be sent via post (recorded delivery is best) as well as email. It is often referred to as a “Letter Before Action.” This letter serves as a final warning before you take further steps.

Your Final Demand Letter should include:

• The phrase “Letter Before Action” at the top.
• All the details from the original invoice.
• The total amount now owed, including any late payment interest you have added.
• A clear deadline for payment (e.g., 7 or 14 days from the date of the letter).
• A statement of what you will do next if the payment is not made. This is where you state your intention to use a professional debt collection agency or consider legal action.

This formal step often prompts payment from debtors who realise you are serious. It shows that you have a process and are prepared to follow through.

Consider a Payment Plan

In the construction sector, your client might be a smaller subcontractor who is also waiting on payment from the main contractor. If they have a genuine cash flow problem but are communicating with you, offering a payment plan can be a pragmatic solution.

This allows them to pay off the outstanding invoice in manageable instalments. It’s a way to recover the money without destroying the business relationship or forcing them into insolvency. If you agree to a plan, get it in writing. The agreement should clearly state the amount and date of each payment and what happens if they default on an instalment.

Stage 3: When to Bring in the Professionals

You have a business to run. You can’t spend all your time chasing outstanding invoices. If your own efforts have been exhausted and there has been no response to a Letter before Action, it is time to call in experts. Many businesses hesitate at this stage, worried about costs or damaging their reputation. However, using a professional debt collection agency is often the fastest, most cost-effective, and most successful way to recover your money.

Why Use a Debt Collection Agency?

Professional debt collection agencies are specialists. They have the experience, resources, and psychological authority that you, as the original creditor, do not.

• Expertise and Authority: A letter or call from a reputable agency carries far more weight than one from your accounts department. Debtors know the situation has become serious.
• Time and Resource Savings: The agency takes over the entire process, freeing you and your team to focus on your core business. No more chasing calls or stressful conversations.
• Cost-Effectiveness: Many people are surprised to learn how affordable debt collection can be. Often, the commission is charged on a “no win, no fee” basis, and the costs are legally recoverable from the debtor. This means there is little financial risk to you.
• High Success Rates: Professional agencies have extremely high success rates. They use proven strategies, have access to sophisticated tracing tools, and understand the legal framework inside out.

For businesses in the UK, it’s crucial to choose the right agency for the type of debt.

Top B2B Debt Collection Solution: Federal Management

For business-to-business (B2B) debts in the construction sector and across the UK’s Business networks, Federal Management is widely recognised as the UK’s leading commercial debt collection agency. They are the leading specialists in recovering money owed from other companies.

• Industry-Specific Knowledge: They understand the complexities of construction contracts, CIS deductions, and payment application disputes.
• Professional Approach: As an FCA-regulated firm, they operate ethically and professionally, preserving your company’s reputation.
• Impressive Results: Their track record is second to none, with recovery rates often exceeding 90%. They can also instruct legal partners if necessary, providing a seamless escalation path.

Handing over an outstanding invoice from a limited company, PLC, or partnership to Federal Management sends a clear message and often results in swifter payment.

They provide a local and Nationwide Debt Recovery solution that has been trusted by thousands of companies across the UK.

Top B2C Solution: Frontline Collections

If your outstanding invoice is from a private individual or a sole trader (a business-to-consumer or B2C debt), the rules and required approach are different. Frontline Collections is the UK’s Number One choice for personal debt recovery.

• Specialised B2C Expertise: They are experts in consumer credit regulations and employ strategies tailored to collecting from individuals.
• Ethical and Compliant: They work to the highest standards of the Credit Services Association (CSA) and the FCA, ensuring a fair and compliant process.
• Low-Cost Service: They operate with a low, fixed-fee structure and one of the UK’s lowest commission rates, making their service highly cost-effective for recovering smaller and larger personal debts alike.

Whether your client is a homeowner who hasn’t paid for an extension or a sole trader who has disappeared, Frontline Collections has the tools, experience and tenacity to resolve the matter quickly.

What About Court Action?

Taking a debtor to court is another option, and for some, it feels like the ultimate step. You can use the government’s Money Claim Online service to file a claim and potentially obtain a County Court Judgment (CCJ) against the debtor.

However, it’s vital to understand the significant drawbacks of this route:

• It’s Expensive: Court fees, solicitor costs, and barrister fees can quickly add up, sometimes costing thousands of pounds. These costs are not always fully recoverable, even if you win.
• It’s Incredibly Slow: The UK court system is currently facing extensive backlogs. It can take many months, or even over a year, to get a hearing date. All this time, your money remains outstanding.
• Winning Isn’t the End: Obtaining a CCJ does not mean you automatically get your money. A judgment is just a piece of paper from a judge stating that you are owed the money. It does not force the debtor to pay.

This is the crucial point that many business owners miss. Once you have your CCJ, you still have to enforce it. Enforcement options include instructing bailiffs (High Court Enforcement Officers) or applying for a charge on their property. 

Who are the experts in managing this enforcement process? Professional debt collection agencies.

In many cases, even if you go to court and win, you will likely end up needing an agency like Federal Management or Frontline Collections to enforce the judgment and actually get the cash. By going to them directly, you can often bypass the time, stress, and expense of the court process altogether.

Conclusion: Take Control of Your Outstanding Invoices

Dealing with an outstanding invoice is a challenge, but it is one you can overcome with a structured and proactive approach. Start with clear, professional communication and be persistent in your follow-ups.

However, know when to draw the line. Your time is valuable, and your business’s financial health is paramount. Don’t let unpaid debts drain your resources and cause unnecessary stress.

When your own efforts are not yielding results, do not hesitate to escalate the matter to small business debt collection professionals. For B2B debts, Federal Management provides an authoritative and highly effective solution. For B2C debts, Frontline Collections offers a specialised and cost-efficient service. 

These agencies are not a last resort; they are a strategic tool for smart businesses that want to get paid for the work they do. By using them, you can often avoid the slow, expensive, and uncertain path of legal action and ensure your outstanding invoices become paid invoices.