What to do when a customer won't pay: chasing late payment as a sole trader

The job is finished, the certificate is done and the customer was all smiles when you left. Two weeks later the invoice is still unpaid, your texts are being read and ignored, and you are starting to feel daft for asking again. When a customer won't pay, most sole traders either chase too softly for too long or lose their temper. Neither gets the money in. What follows is the calm, firm way to do it.

Why I take getting paid so seriously

In October 2007 I lost my business in a single morning. Nine staff, three vans and an office in South London, gone. I had plenty of work in the pipeline. What killed it was two developers going under in close succession, owing me over £40,000 between them.

When I started again with my hand tools and my wife's car, I made one decision that shaped everything after it. I would work for homeowners, and homeowners pay on completion. No 30 days, no 60 days. When someone wants a job done in their home, they expect to pay for it when it is done.

That is the first lesson in chasing late payment as a sole trader. The best chase is the one you never have to make.

Stop it happening in the first place

Most payment trouble is set up before the job starts. Three things fix nearly all of it.

Put it in writing. Every quote should say what you are doing, what it costs and when payment is due. "Payment on completion" written on the quote turns a vague understanding into an agreement they have signed up to.

Say it out loud. When they accept, tell them: "I'll test everything with you at the end, and payment is due on the day." Said in a friendly way, nobody minds. They only mind when it comes as a surprise.

Make paying easy. If they can pay by card or bank transfer there and then, standing in the kitchen, most will. The article on taking card payments covers what that really costs you, and it is usually far less than one unpaid bill.

On bigger jobs, agree any deposit or stage payment in writing before you start. Taking a deposit for materials is normal, and a customer who will not pay one is telling you something early.

When a customer won't pay: the first few days

Most late payers are not crooks. They forgot, the bank transfer is sitting in their drafts, or they are waiting for payday. So start friendly and assume the best.

Send the invoice the same day if you did not get paid on the spot. A day or two after it is due, send a short, polite message:

"Hi Sarah, hope the new lights are behaving themselves. Just a reminder that the invoice for Tuesday's job is now due. The bank details are on it, or I can send a card link if that is easier. Thanks."

That last line matters. Giving them an easy way to pay removes the excuse.

If they still go quiet

A week later, pick up the phone. A call is harder to ignore than a text, and you learn far more from how they answer. Ask plainly: "Is there a problem with the work, or is it just the payment?"

If there is a problem with the job, deal with that first. Go back, look at it and put it right if it is yours to fix. A customer holding back money over a snag will usually pay the day it is sorted.

If money is tight for them, you can agree a short payment plan, in writing, with dates. That is not you giving anything away. You are still getting the full amount, just in two or three parts. Never knock money off to get it paid faster. It teaches the customer that waiting gets them a cheaper job.

Keep a simple record as you go: dates, what you sent and what they said. You will want it if this goes further.

The letter before action

If the friendly reminders and the phone call have not worked, it is time to put it formally. A letter before action, sometimes called a letter before claim, tells them how much they owe, what it is for, and that you will start a court claim if it is not paid.

Because your customer is a private individual, there is a set process to follow, called the Pre-Action Protocol for Debt Claims. In short, you send the letter by post with a copy of the invoice, and you give them 30 days to pay or reply before you go to court. If you skip that step, the court can hold it against you, even when you are owed the money.

Keep the tone firm and factual. No threats, no insults, no telling the neighbours. Just the facts and a deadline. A surprising number of people pay the week that letter lands, because it is the first time it feels real to them.

Small claims: the last resort

If the 30 days pass with no payment, you can make a claim online through the government's money claim service. For most domestic jobs it will go through the small claims track, which covers claims up to £10,000 and is designed for people without a solicitor.

There is a court fee based on the size of the claim, which you add to what you are claiming. Check the current fees on GOV.UK before you start.

Be honest with yourself before you do it, though. It takes time, and a court judgment does not put money in your bank on its own. If the customer genuinely has nothing, you may win and still wait. For a few hundred quid, weigh up whether the hours are better spent finding your next good customer.

What you can and cannot add on

You may have heard you can add interest and a late payment fee to overdue invoices. That law, the Late Payment of Commercial Debts Act, only applies when both sides are businesses. For a homeowner, you can only add late charges if they were clearly set out in your terms before the job started. If they were not, do not threaten them.

Landlords and letting agents are worth a word here. A landlord buying work for a property they let out may be treated as a business customer, which changes the picture. If you do a lot of landlord work, get your payment terms agreed in writing from the first job. The article on getting your first landlord client covers how to set that relationship up properly.

The bigger fix

Every hour spent chasing money is an hour you are not earning it. If late payment keeps happening, look at who you are working for and how you are getting them. Customers who found you through someone they trust, who chose you because you look like the expert, tend to pay without being asked twice.

Building that kind of customer base, with the paperwork and systems that stop problems before they start, is what we work on together inside My Electricians ToolBox. Membership is £127, and it is currently £97 a month if you want to have a look.

So how much are you owed right now, and what is stopping you sending that first reminder today?