Glossary
Invoicing & debt recovery glossary
Plain-English definitions of the terms you'll meet when invoicing clients and chasing late payment in the UK.
- Aged debt report
- A list of unpaid invoices grouped by how overdue they are.
- Bad debt
- Money owed to you that you no longer expect to be paid.
- Cash flow
- The timing of money coming into and going out of your business.
- CCJ (County Court Judgment)
- A court order in England and Wales requiring someone to pay a debt.
- Credit note
- A document that reduces or cancels an invoice you have already issued.
- Debtor days (DSO)
- The average number of days it takes your customers to pay you.
- Deposit
- A part-payment taken before work starts, to commit the client and reduce your risk.
- Dissolved company
- A company that has been removed from the Companies House register and legally no longer exists.
- EOM (end of month)
- Payment terms counted from the end of the month the invoice is dated in.
- Fixed compensation (late payment)
- A fixed sum of £40, £70 or £100 per invoice that a business can claim on top of statutory interest.
- Invoice finance
- Borrowing against unpaid invoices to get cash before the client pays.
- Late Payment Act 1998
- The UK law giving businesses the right to statutory interest and compensation on late B2B payments.
- Letter before action (LBA)
- A formal written demand sent before starting a court claim, giving the debtor a final chance to pay.
- Liquidation
- The formal process of closing an insolvent company and selling its assets to pay creditors.
- Money Claim Online (MCOL)
- The HM Courts & Tribunals Service website for issuing simple debt claims online in England and Wales.
- Net 30
- Payment terms meaning the invoice must be paid within 30 days of the invoice date.
- Payment terms
- The agreed rules for when and how an invoice must be paid.
- Pre-Action Protocol for Debt Claims
- Court rules that set out what a business must do before suing an individual or sole trader for a debt.
- Pro forma invoice
- A preliminary invoice sent before work or delivery, often to request upfront payment.
- Reference rate
- The Bank of England base rate used to calculate statutory late payment interest for a given six-month period.
- Remittance advice
- A note from a customer confirming that they have paid, and which invoices the payment covers.
- Retention of title
- A contract term saying goods (or rights) remain yours until you are paid in full.
- Small claims track
- The court track for most claims up to £10,000, designed to be used without a solicitor.
- Statutory interest
- Interest that UK law lets a business charge on late B2B payments: 8% plus the Bank of England base rate.
- VAT invoice
- An invoice from a VAT-registered business that includes the details HMRC requires.
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