How to get clients to pay on time: contract terms, chasing and late payment rules (2026)

The way to get clients to pay on time is to make paying late harder than paying on time, before any work starts. That means a deposit, milestones, a signed contract with a short due date and a late fee, an invoice that leaves nothing to query, and a chase sequence you run the same way every time. When that fails, the law helps a lot more in the UK and the EU than in Australia or the US, and very little across borders.

This guide is for freelancers and agency owners, often working for overseas clients, who are chasing late invoices or want to stop doing it. It covers contract terms, invoices, a chase sequence, the official late payment rules in four jurisdictions side by side, and what you can realistically do when the client is abroad.

Why clients pay late

Most clients pay late because nothing makes them pay on time: no deposit, a vague due date, an invoice sent to the wrong person, or no consequence for being late. Some are short of cash, and a few never meant to pay. Contracts and invoicing fix the first group, early chasing catches the second, and deposits are your only real protection against the third.

The common story on freelance forums is a client who approved the work, received the files, then went quiet. The fix for that one is simple: don't hand over final files, source code or ownership until you're paid.

Contract terms that prevent late payment

Your contract is the cheapest debt collection tool you'll ever have, because it's agreed while the client still wants the work. business.gov.au's payment terms guidance says to put your terms on invoices and contracts so customers know which payment methods you accept, when you expect payment, whether you offer credit and how you collect overdue payments.

Put these in every agreement:

• A deposit before work starts. For a new client, ask for a meaningful share upfront. It filters out clients who can't or won't pay, and it means a client who disappears owes you less.
• Milestones paid before the next stage. Split larger projects into stages, each invoiced and paid before the next one begins. Your exposure is never more than one stage.
• A short, specific due date. "Payment due within 14 days of invoice" beats "net 30" and beats nothing at all, because without an agreed date the default rules below give the client 30 days or more.
• A late fee or interest clause. In Australia and the US this clause is usually the only basis for charging interest. In the UK, a contract rate replaces statutory interest, so if you write one in, make it a real rate.
• A kill fee. If the client cancels part way through, they pay for work done plus an agreed percentage of the remainder. It stops "we've decided not to go ahead" turning into "we're not paying for what you've done".
• Ownership passing on payment. The client gets copyright, source code or final files only when the invoice is paid in full. This is the clause that deals with the client who approves the work and then ghosts.
• The right to pause work when an invoice is overdue, without being in breach yourself.
• Currency, payment method and who pays fees, so a client can't short-pay you by the bank charges.
• Governing law. Your Europe notes that contracts are governed by the law the parties choose, and that if the contract is governed by non-EU law the EU late payment rules may not apply. Choose your own jurisdiction's law where the client will accept it.

If you subcontract, flow the same terms down to your suppliers; our guide to going from freelancer to agency covers what a subcontract should include.

What a good invoice includes

A good invoice gives the client's accounts team no reason to put it aside. GOV.UK's invoice checklist is a sound template wherever you're based. It says an invoice must include:

1. A unique identification number.
2. Your company name, address and contact information.
3. The company name and address of the customer you're invoicing.
4. A clear description of what you're charging for.
5. The date the goods or service were provided (the supply date).
6. The date of the invoice.
7. The amount or amounts being charged.
8. VAT, if applicable.
9. The total amount owed.

GOV.UK adds that you must use VAT invoices if both you and your customer are VAT registered. Also add the due date as a calendar date, any purchase order number, your bank details or a payment link, and who approved the work. Send it to accounts payable, copying your contact, on the day you deliver.

A practical chase sequence

The best chase sequence is boring, early and the same every time. The steps below are a suggested schedule, not a legal requirement; adjust the timing to your terms. business.gov.au's unpaid invoice guidance follows the same order: check the contract, send a reminder, send a letter of demand, get help with dispute resolution, use a debt collector, then consider legal action.

1. A few days before the due date: a friendly note confirming the invoice was received and is approved for payment. This catches "we never got it" early.
2. The day after the due date: a short reminder with the invoice attached and a payment link. business.gov.au points out a missed payment could just be an oversight.
3. One week overdue: a phone call or message to your contact, not just accounts. Ask when it will be paid and who's holding it up.
4. Two weeks overdue: pause work, in writing, under your contract's pause clause. Restate the amount and any late fee or statutory interest you're entitled to.
5. Three to four weeks overdue: a formal letter of demand.
6. After the letter's deadline: a collection agency, mediation or a small claim, depending on the amount and where the client is.

A letter of demand, in business.gov.au's template guidance, states how much the business owes you, what for and when it needs to be paid, may warn that you'll consider legal action, and attaches the contract, the invoice and earlier reminders. It also tells you to check nothing in the letter could be called false or misleading, and to include late payment interest only if it was specified in the contract.

If you use a collector, business.gov.au's debt collection page says most commission rates vary between 5% and 30% of the value of the debt, and warns that escalating could further strain the relationship.

Late payment rules by country

The law gives you the most help in the UK and the EU, where late interest and compensation apply automatically between businesses. In Australia and the US, your contract does almost all the work.

United Kingdom

GOV.UK's late payment guide says an agreed payment date must usually be within 60 days for business transactions (30 days for public authorities). You can agree a longer period, but it must be fair to both businesses. If no date was agreed, payment is late 30 days after the customer receives the invoice or you deliver the goods or service, whichever is later.

Once a business customer is late, you can claim:

• Statutory interest of 8% plus the Bank of England base rate for business to business transactions.
• Fixed compensation of £40 for debts under £1,000, £70 for debts from £1,000 to £9,999.99, and £100 for debts of £10,000 or more, charged once for each payment.
• Reasonable costs each time you try to recover the debt.

The base rate used isn't today's. Under the 2002 interest rate order, the rate is fixed on 30 June for interest that starts running between 1 July and 31 December, and on 31 December for interest starting between 1 January and 30 June. The Bank of England held Bank Rate at 3.75% on 18 June 2026 and again in July and September, so a debt that goes late in the second half of 2026 earns 11.75% a year. The next Bank Rate decision is due on 5 November 2026, but that doesn't change the rate already fixed for this half year.

Worked example using GOV.UK's method: on a £5,000 invoice, 11.75% is £587.50 a year, or about £1.61 a day. Sixty days late is about £97 in interest, plus £70 fixed compensation. Send a new invoice if you add interest, as GOV.UK suggests. You can't claim statutory interest if your contract sets a different rate.

European Union

The EU's Late Payment Directive (2011/7/EU) says, per the European Commission, that enterprises have to pay invoices within 60 days unless they expressly agree otherwise and it isn't grossly unfair, and public authorities within 30 days, with 60 only in very exceptional circumstances. Creditors are automatically entitled to statutory interest of at least 8% above the European Central Bank's reference rate and a minimum of €40 for recovery costs. The Commission says it's working on a revision of the directive.

Your Europe (last checked by the EU on 5 August 2026) adds the practical detail:

• Without an agreed payment period, interest becomes payable 30 calendar days after the client receives your invoice.
• Interest runs from the day after the contractual due date, and you charge it on the gross amount including VAT.
• The flat €40 compensation applies to each invoice paid late, and you can claim more reasonable costs, such as collection or legal fees, if they exceed it.
• It lists each country's statutory rate for 1 July to 31 December 2026, for example 10.15% in the Netherlands, Italy and Portugal, 10.40% in Ireland and Spain, 10.52% in Germany and 12.40% in France.

Australia

Australia has no general rule giving you automatic interest on a late business invoice, at least in the official small business guidance. business.gov.au's letter of demand guidance says to include a late payment interest rate only if it was specified in the contract, so put one in yours.

What Australia does have is help. The ASBFEO's dispute support responds to small businesses and family enterprises in contract and payment disputes with other businesses, and provides access to mediation; "Recovering unpaid invoices" is one of the options in its online tool. The same page notes small claims of up to A$10,000 are heard by the ACT Civil and Administrative Tribunal and disputes under A$25,000 by the Queensland Civil and Administrative Tribunal. Limits differ in each state and territory.

The Payment Times Reporting Scheme is relevant if you supply big Australian companies. Since 7 September 2024, reporting entities include large businesses with annual consolidated revenue of A$100 million or more. You can use the register to search and compare their payment times reports, and businesses that pay small business suppliers within 20 days appear on a fast payers list. Check a large prospect there before agreeing to their standard terms.

United States

There's no federal statute in the US that sets payment deadlines or late interest for freelance or business invoices. Your contract, state law and, in a few places, local freelancer laws decide it.

New York City is the clearest example. Its Freelance Isn't Free Act says contracts worth US$800 or more, including all agreements with the same hiring party totalling US$800 in any 120-day period, must be in writing and spell out the work, the pay and the payment date. If there's no payment date, the hiring party must pay within 30 days. The page says freelancers have a right to collect double the amount they weren't paid, and retaliation is illegal. Complaints go to the city's Department of Consumer and Worker Protection.

New York State went further: its Department of Labor says the Freelance Isn't Free Act added Article 44-A to the General Business Law on 28 August 2024, with complaints to the state Attorney General, and it publishes a model contract you can use.

For small amounts, US small claims courts are run by each state. California's court self-help site, for example, sets a limit of US$12,500, or US$6,250 if you're a business, and you can't have a lawyer with you in court.

Side by side

Getting paid across borders

Across borders, prevention beats enforcement, because most recovery tools stop at the border. Assume you won't sue an overseas client.

Small claims are mostly local

Small claims courts are built for people in the same country. GOV.UK says you can't claim online if the person or business you're claiming against has no address in England or Wales, and fees run from £35 for claims up to £300 to £455 for claims of £5,000.01 to £10,000. Disputed claims of £10,000 or less go to court-organised mediation first.

The EU is the exception. The European Small Claims Procedure covers claims up to €5,000 (excluding expenses) against someone in another EU country except Denmark, you don't need a lawyer to start one, and the judgment is valid in every EU country except Denmark. If you're in Lisbon and your client is in Berlin, that's a real option. If you're in Bali and your client is in Texas, it isn't.

Collection agencies

A collection agency in the client's country is often the most practical step for a cross-border debt, because it knows local rules and can send a demand on local letterhead. Expect to give up a commission (business.gov.au's 5% to 30% range is for Australia), and check it's properly licensed or registered where the debtor is.

Payment-first tools

Payment-first tools collect money before or at the moment of delivery, so you never chase. Options include:

• Card-payable invoices with automatic reminders. Stripe Invoicing costs 0.4% per paid invoice on Starter or 0.5% on Plus (checked 26 Oct 2026), and includes a hosted invoice page and automatic email reminders. If Stripe isn't available where you live, our guide on what to do when Stripe isn't available in your country covers the alternatives, and our guide to merchant of record vs Stripe explains when someone else should handle the selling.
• Upfront payment for small jobs. Anything under a day's work can simply be paid before you start.
• A multi-currency account, so overseas clients can pay locally in their own currency and have no excuse. Our guide to business accounts for remote founders compares Wise, Payoneer, Revolut and Airwallex.

Escrow and platform protection

Escrow means the client pays a third party before you start, and the money is released when the work is accepted. Escrow.com describes that flow: the buyer pays into its account, the seller is told the funds are in escrow, the buyer gets a set number of days to inspect and accept or dispute, and the funds are then released. It covers goods and services, offers milestone escrow, and charges a fee.

Freelance marketplaces run their own payment protection for work booked through them. Their help pages refused to load for us on 26 October 2026, so check the current rules on the platform itself before you rely on them, and note that protection usually depends on doing the whole job inside the platform.

Common mistakes

Most unpaid invoices trace back to something agreed, or not agreed, before the work began.

• Starting without a deposit for a new client, especially one overseas.
• No written contract, or one with no due date, no late fee and no pause clause.
• Handing over final files, code or ownership before payment. That's what makes ghosting free for the client.
• Invoicing late or incompletely, so the accounts team has an excuse to hold it.
• Sending invoices only to your contact, not accounts payable.
• Waiting weeks before the first chase, then jumping straight to threats.
• Threatening interest you aren't entitled to. In Australia that's interest your contract doesn't give you; business.gov.au also warns letters must not be false or misleading.
• Agreeing to a big client's 60 or 90 day terms without checking how they actually pay.
• Letting a large unpaid balance build up across several invoices instead of pausing work after the first.

A checklist before your next project

1. Ask for a deposit and split the work into paid milestones.
2. Sign a contract with a 7 or 14 day due date, a late fee or interest clause, a kill fee, a pause clause and ownership passing on payment.
3. Agree the currency, the payment method and who pays bank charges.
4. Set up card-payable or local-currency invoicing with automatic reminders.
5. Send a complete invoice on delivery, to accounts payable.
6. Run the chase sequence on fixed dates.
7. Know your next step before you need it: statutory interest in the UK or EU, ASBFEO in Australia, a freelancer complaint in New York, or a collector in the client's country.

To compare notes on clients, contracts and getting paid with other remote founders, join Remote Builders (it's free).