If you have customers paying late, the cost isn’t just the chasing. It’s cash, often a six-figure sum for a business of 10 to 50 staff, sitting in your customers’ bank accounts instead of yours. Most owners of engineering, technical and SaaS businesses know roughly what they’re owed. Far fewer know how much of it is late, or what that lateness is holding back. This guide shows you how to work out the figure in about ten minutes, what usually causes it, and what to fix first.

You’re not alone. Government research estimates that UK businesses are owed around £26bn in late payments at any one time, an average of £17,000 for each business affected, and that late payment costs the UK economy almost £11bn a year (Department for Business and Trade, 2025). The national figure matters less than your own one, so let’s work that out.

How much cash are customers paying late tying up?

Here is the rule of thumb we use:

Cash tied up = annual sales × average days late ÷ 365

Take a made-up business with £4m of annual sales whose customers pay, on average, 20 days after the due date. That’s £4,000,000 × 20 ÷ 365 = about £219,000 sitting with its customers. Put another way, £4,000,000 ÷ 365 is about £11,000 of sales a day, so every day of lateness holds roughly £11,000 of cash.

That money isn’t lost. You’ll collect most of it in the end. But while it sits with your customers, you are funding their business. You still pay wages, suppliers and HMRC on time. The gap gets filled by an overdraft, a hire you put off, a piece of kit you delay, or the owner’s own money.

Finding your own “days late”

You need two numbers from your accounting software. Xero, QuickBooks and Sage all show both.

1. Trade debtors: the total your customers owe you today (the aged receivables report).
2. Annual sales: the last 12 months, excluding VAT.

Then work out your debtor days:

Debtor days = trade debtors ÷ annual sales × 365

Compare the answer with your standard payment terms. If your terms are 30 days and your debtor days come out at 50, your customers are paying about 20 days late on average.

Worked example (made-up company): sales of £4,000,000 and trade debtors of £548,000. £548,000 ÷ £4,000,000 × 365 = 50 debtor days. Against 30-day terms, that’s 20 days late, or about £219,000 of cash.

Two cautions before you trust the number

• Look at the trend, not one reading. A large invoice raised last week pushes debtor days up for a month. Work it out at the end of each of the last three to six months.
• Use your real terms. If some of your biggest customers are on 60 days, your average terms are longer than the 30 days printed on your invoices. Weight it by who owes you the most.

If the figures look odd, your accountant can check that the debtors balance is clean (no old credit notes or unallocated payments distorting it).

The number most owners miss: invoicing late

Late payment has a twin: late invoicing. If the invoice goes out five days after the job is finished, the customer’s payment clock starts five days late too. On £4m of sales, five days of slow invoicing holds another £4,000,000 × 5 ÷ 365 = about £55,000, on top of whatever customers add by paying late.

To check it, pick ten jobs finished last month and compare each completion date with its invoice date. If the gap is more than a day or two, find out what the invoice was waiting for. It’s usually a timesheet, a materials figure, a purchase order number, or a manager’s sign-off.

Why customers pay late (it’s often not them)

When we map how cash comes into a business, the causes are usually inside it, not with the customer:

• The invoice can’t be paid as sent. It’s missing the purchase order number, goes to the wrong person, or doesn’t match the quote. The customer’s accounts team parks it, and nobody tells you.
• Terms were never agreed in writing. If your quote or contract doesn’t state payment terms clearly, the customer’s own terms tend to win.
• There’s no chase routine. Chasing happens when someone remembers, often weeks after the due date. Customers learn whose invoices they can leave until last.
• Disputes surface late. A query about one line holds up the whole invoice, and you only hear about it when you chase.
• Big jobs are billed at the end. A three-month project invoiced in one go means three months of wages and materials funded by you.

The law is changing too. The Commercial Payments Bill, introduced to Parliament in May 2026, proposes a 60-day maximum for most business-to-business payment terms, with a lead-in period before it applies. That helps at the margins. It won’t fix an invoice that goes out late, to the wrong person, without a PO number. If you’re unsure how the Bill would affect your contracts, ask your accountant or solicitor.

What to fix this week

In order of effort, smallest first:

1. Invoice on the day the work is finished. Make it a rule, then fix whatever stops it, usually timesheets or sign-off.
2. Capture the PO number and the accounts contact at the quote stage, not when you invoice. Put both on the job sheet.
3. State payment terms on every quote and on the first page of every contract, in plain words: “Payment due 30 days from the invoice date.”
4. Set a fixed chase routine. A friendly reminder three days before the due date, a phone call the day after it, and firmer emails at seven and fourteen days overdue. Set the reminders up in your accounting software so they happen without anyone remembering.
5. Bill large jobs in stages: a deposit at order, then payments at agreed milestones.
6. Ask one question when you send each invoice: “Is there anything that would stop this being paid on time?” It brings disputes forward by weeks.

Our free Late Payment Kit includes chase-email templates you can adapt for step four.

What it adds up to: a second example

Take another made-up business: £2m of sales, customers paying 15 days late on average, and invoices going out 5 days after the job.

• Late payment: £2,000,000 × 15 ÷ 365 = about £82,000
• Slow invoicing: £2,000,000 × 5 ÷ 365 = about £27,000
• Total cash held up: about £110,000

That’s before looking at pricing, quoting or admin, which is where the rest of the money usually leaks. For a firm of 10 to 50 staff, £110,000 can be the difference between a stretched overdraft and a comfortable bank balance. Our Insight review puts a £ figure on each of these leaks and ranks them, so you know which to fix first. You can see how it works here.

Work out your own figure

Our free leak calculator takes a few numbers and shows how much cash your late payers and invoicing delays are holding, plus a rough estimate of your price gap. It takes about two minutes.

If the number is bigger than you’d like, book a free 30-minute call. We’ll look at where your cash is stuck and which fix to start with. Or call us on 020 3918 0460.