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A struggling client wants a payment plan. Should I agree, and how do I set one up?

The short answer

Yes, on three conditions. They pay something on signing, you both sign a written plan11, and the plan says the whole balance falls due if one instalment is missed. Once the payment date has passed2, the late-payment interest is yours to keep, trade or drop, because the Act limits only terms agreed before the debt exists1. The fixed sum3 is yours from the first late day.

Mara, WolfX research desk
Written with AI, checked by a person · 8 October 2026

England and Wales only. WolfX is software, not a law firm.

What you can add

A £12,000 invoice, 70 days late

Say you invoiced another business £12,000 for a fabrication job, due on 31 July 2026. On 9 October it is still unpaid, 70 days late, and they ask to pay in instalments.

£12,000.00The invoice

£270.41Interest: £12,000 × 11.75% ÷ 365 × 70 days4

£100.00Fixed sum (debts of £10,000 or more)3

£12,370.41Owed on 9 October 2026

Until a plan is signed it grows by £3.86 a day. Say the plan is £2,100.00 on signing (£2,000.00 off the invoice and the £100.00 fixed sum), then £2,000.00 a month, from 11 November 2026 to 11 March 2027. The interest is yours to set. Let it run on what is still owed and it adds £301.32 by 11 March 2027. Freeze it at signing and you give up that £301.32. Waive it, on condition every payment lands on its date, and the £270.41 goes too; the agreement below lets you claim it again if one is late.

The road ahead

Six steps. No fees.

Step 1: Check the company before you answer
Search the company on Companies House12 and read its recent filings, then follow the full check. Ask why they cannot pay in one go and when their own money comes in. A plan from a company that is going under is a slow way to lose.
Cost: FreeTime: 15 minutes
Step 2: Ask for money now, then equal payments
Ask for a payment on signing, then equal instalments on fixed dates that follow when their money arrives. Aim to finish in months, not years. Expect a counter-offer, with smaller sums or a later start.
Cost: FreeTime: One call
Step 3: Decide what happens to the interest
Interest is yours to keep, freeze or waive, and the sum above prices each choice. The rate is fixed when the interest starts4: 8% over the 3.75% Bank Rate5 of 30 June 2026, so it stays 11.75% here whatever Bank Rate does next.
The agreement below is drafted to freeze it at signing and waive it if every payment lands on its date, so the client has a reason to be on time.
The fixed sum3 is already yours. Give up either it or the interest only for something in return.
Cost: FreeTime: 10 minutes
Step 4: Put it in writing and get it signed
Use the agreement below. The Small Business Commissioner11 advises writing the terms down and sharing them by email. Ask for a signed, scanned copy from a director (a sole trader signs for themselves), with the name printed under the signature.
The signature does a second job. You have six years6 to sue, and a signed, written acknowledgment8 of the debt, or any payment on it, starts them again7 from that day, if time has not run out.
Cost: FreeTime: A day or two
Step 5: Ask for payment up front on new work
While the old invoice is open, ask for payment before work starts on anything new. Clause 5 of the agreement says so, so it is agreed, not sprung on them. If a contract already obliges you to keep supplying, read what it lets you stop first.
Cost: FreeTime: Same day
Step 6: Act on the first missed payment
Put every date in your diary. The agreement makes the whole balance due once a payment is more than 7 days late, a number you can change. Send a reminder with the sum, then a letter before action if it stays unpaid.
A sole trader is covered by the debt protocol9: it expects no claim while they keep to the plan, then an updated Letter of Claim, with 30 days to reply9.
For a company, the Practice Direction10 has no hold-off rule, so only clause 5 holds you back.
Cost: FreeTime: When a payment is late

A letter you can copy

Payment plan agreement, with a covering email

Send it once you have agreed the dates and amounts by phone and want them signed.

New email

SubjectPayment plan for invoice : please sign and return by

Dear , Thank you for telling me where things stand at . Below is the payment plan for invoice , written down so the dates are clear on both sides. Please read it, sign it and send me a scanned copy by . If you believe any of this is wrong, please tell me before that date and say why. Kind regards, PAYMENT PLAN Between ("I") and , company number ("you"). 1. The debt. Invoice , for , was due on . You accept that this amount is owed and has not been paid. 2. The payments. You will pay on signing, then: Each payment is made by bank transfer to . The first payment includes the fixed sum of for late payment. The last payment clears the invoice. 3. Interest. Interest stops growing on the day you sign, at . If every payment arrives on its date, I will waive it. If any payment is late, I may claim it, and further interest on the unpaid balance, as the law allows. 4. A missed payment. If a payment is more than 7 days late, the whole unpaid balance falls due at once. I may then take steps to recover it, including a court claim. 5. While the plan is kept. I will not start a court claim for this invoice unless clause 4 applies. New orders are paid for in advance until the invoice is cleared. 6. Starting. The plan starts when the first payment reaches my account. Signed for : ____________________ Date: ____________ Name: Signed for , by a director: ____________________ Date: ____________ Name: ____________________

Tap a highlighted gap to see what goes in it.

Email it as a PDF so it is dated, and ask for a signed, scanned copy back. Countersign once the first payment has arrived. Keep both with the invoice. Clause 3 is a choice. To keep interest running, use: Interest carries on at the statutory rate on the unpaid balance and is added to the last payment. To give it up, use: I will not claim interest on this invoice unless clause 4 applies. The 7 days in clause 4, the instalment dates and the advance payment in clause 5 are drafting choices, not law. Change any that do not suit you.

When not to bother

When it isn't worth it

They already have a petition, an administrator or a liquidator. A plan is the wrong tool; see liquidation and administration. Check first, as in step 1.
Their offer runs for years. £100 a month is ten years for £12,000, and interest would outrun it. Refuse in writing, with reasons; the debt protocol expects that9 of a sole trader who asks for time to pay.
They have broken a plan before. Ask for more on signing, or skip the plan and send a letter before action.
It is a few hundred pounds. Six payments for £500 is six dates to track. Ask for it all, or half now and half in 14 days.
The invoice is more than six years overdue. Once time is up, a payment or a signature does not revive the claim7. This page is for business customers in England and Wales; consumers, Scotland and Northern Ireland follow other rules.

The Wolf's note

A plan is a promise with dates in it, so the first date is the test. If the money lands that day, the rest is a diary. If it does not, clause 4 has already said what happens next.

Mr. Wolf · the AI inside WolfX

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