4 Reasons Why an Invoice Isn’t Paid On Time


A lot of businesses find themselves wondering why their invoices aren’t being paid on time. This article will outline 4 reasons why your debtor isn’t paying you. With the ever changing economy, some business will go through tough phases in their financial year which could lead to invoices not being paid. However, there’s usually underlying reasons as to why they don’t pay you on time. 

1) Your Business practices are passive

A lot of businesses are very laid back when waiting to receive payment on their invoices which a lot of debtors take advantage of. Because your business has a ‘pay me later’ approach, this gives the debtor an opportunity to leave your business as its least priority when it comes to payment. As a business you need to agree on concrete terms that urge a customer to pay invoices on time in order to keep your relationship mutual.

2) They are not satisfied with the Product/Service

One of the primary reasons for debtors to pay late is the dissatisfaction of the service/product they have received. In addition there could  have been complications to the service or product which lead to an unwilling debtor. For example if a construction company received faulty goods, they will have less respect for their supplier therefore ruining their business relationship.

Having a smooth and efficient service always leads to a better cashflow and satisfied customers who will pay on time. Its not an easy flaw for a business to admit, however it should be noted that a bad business relationship could lead to disastrous complications in a business cycle

3) They have Cash flow issues

One of the common reasons for late payments is an occurring issue of cash flow from struggling businesses. It is important to communicate effectively with customers to find the reasons as to why they are struggling with cashflow issues and  maybe offer a payment plan as a gesture of goodwill.

They could just be going through a tough seasonal change or they may have some changes in their business they were not prepared for. It’s not a great business strategy for debtors to admit that they’re struggling  because it makes them lose credibility.

4) Your Business doesn’t know the Late Payment Law

Under the Late Payment of Commercial Debts (Interest) Act 1998 and subsequent Regulations, companies can claim interest and also receive fixed sum compensation if a payment is not received or if a payment is late. Although the law protects businesses from the damaging effects of late payments, some companies and organisations have been reluctant to use it. In some instances, people assume that instigating debt recovery will harm commercial relationships. 

However, late payment law can be used to recover debts without souring existing business arrangements. Many businesses that use the late payment law still maintain good relationships with their customers and continue to trade with them. By failing to utilize the late payment law, it could be costing your business thousands of pounds in lost compensation, interest and costs.

14 June 2018