Setting payment terms and chasing late payments
How to set payment terms in Xero and using Xero to chase payments
Clear payment terms on every invoice reduce late payments and make it easier to chase overdue payments when necessary.
Standard payment terms
Set your default payment terms in Xero under ‘Settings’, then ‘Invoice Settings’. Common options are 7, 14, or 30 days. The due date appears on every invoice automatically. Business to Business (B2B) customers typically expect 30 days. For consumer customers or high-value projects, shorter terms or deposits may be more appropriate.
Using Xero to chase
Xero's Awaiting Payment view shows all outstanding invoices and how many days overdue they are. Set up automatic payment reminders in Xero (under ‘Settings’, then ‘Invoice Reminders’) to send automated emails three days before due, on the due date, and seven days after. This significantly reduces late payments without manual chasing.
💡 Good to know: Under the Late Payment of Commercial Debts (Interest) Act 1998, you are entitled to charge interest at 8% above the Bank of England base rate on overdue business to business invoices, plus fixed compensation per invoice (£40 for debts under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more). This right applies automatically and need not be stated on your invoice, though it does not apply where your contract sets its own late payment remedy.
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