How to pay an invoice: steps, reference and late fees

To pay an invoice, check it against what you ordered, then send the exact amount to the bank account shown, before the due date, quoting the invoice number as the payment reference. That takes about five minutes. The details that go wrong are the reference, the due date and what happens if you are late.

This guide explains how to pay an invoice step by step, which payment method to choose, and what the UK and Germany allow a supplier to charge when an invoice is paid late. It also helps suppliers who want to be paid faster.

How do you pay an invoice?

You pay an invoice by confirming it is correct, then transferring the amount due using one of the payment methods the supplier accepts. Follow these six steps.

1. Check the invoice against the order. Compare the description, quantities, price and tax with the quote or purchase order.
2. Check the supplier's details. Make sure the name and bank details match what you hold on file.
3. Find the due date. The payment terms are usually near the total, such as "due October 22, 2026".
4. Choose a payment method. Use the one the invoice lists.
5. Pay the exact amount with the invoice number as the reference. The reference lets the supplier match your payment.
6. Keep the proof. Save the confirmation. Ask for a receipt if you need one.

If anything on the invoice is wrong, tell the supplier before paying and ask for a corrected invoice or a credit note. Do not pay a different amount and hope it is accepted.

What should the payment reference be?

The payment reference should be the invoice number, copied exactly. If the invoice lists a separate payment reference, use that instead. A supplier with fifty open invoices from one client cannot tell which one a bare transfer settles.

Pay one invoice per transfer where possible. If you must pay several together, send the supplier a short list of the invoice numbers covered.

Which payment method should you use?

The right method is the one the invoice lists, weighed against speed, cost and traceability. These are the usual choices.

Check the speed for your own bank, because transfer times vary by provider and by country. A transfer that leaves your account on the due date may land after it.

Pay by a traceable method. For private customers in Germany, the tax relief on craftsman labour under section 35a of the Income Tax Act (EStG) requires payment by bank transfer to the supplier's account. Cash does not qualify.

Avoiding invoice payment fraud

Invoice fraud usually works by changing bank details. A fake email says "we have a new bank account". Take these precautions before paying.

• Phone the supplier on a number you already hold when bank details change.
• Compare the invoice against past invoices from the same supplier.
• Check the account name matches the supplier's company name.
• Be wary of urgency. Pressure to pay today is a warning sign.

When is an invoice due?

An invoice is due on the date the invoice or contract states. If no date is agreed, the law fills the gap in some countries.

In the UK, between businesses, a payment is late 30 days after the customer receives the invoice, or after the goods or services are provided if that is later, according to the GOV.UK page on when a payment becomes late. Where a date is agreed, it must usually be within 60 days for business transactions, according to the same guidance. A longer period must be fair to both businesses.

Payment terms often use shorthand. Net 30 means payment is due 30 days after the invoice date. Due on receipt means pay now. For example, "14 days" means 14 days from the invoice date unless the invoice says otherwise. The due upon receipt guide covers what that term requires.

What happens if you pay an invoice late?

A supplier can charge interest and a fixed fee on a late business invoice in the UK and Germany. Both are set by law, and both apply between businesses rather than to consumers. The worked UK calculation is in how to calculate interest on a late invoice, and the German rules are in late payment interest in Germany.

UK late-payment rules

Statutory interest in the UK is 8% plus the Bank of England base rate for business-to-business transactions, according to GOV.UK. It does not apply if the contract sets a different interest rate. The supplier can also claim a fixed sum depending on the size of the debt, according to GOV.UK debt recovery costs guidance:

A supplier can add the fixed sum only once for each late payment. Suppliers may also claim reasonable costs of each attempt to recover the debt.

German late-payment rules

Under section 288 of the German Civil Code (BGB), default interest on a payment claim between businesses is the base rate plus 9 percentage points a year. Against a consumer, it is the base rate plus 5 points. A business debtor in default also owes a flat fee of €40, according to section 288(5) BGB. The flat fee is credited against any collection-cost damages the creditor claims.

Worked example: two late invoices

An invoice for £2,000 is paid 45 days late by a UK business. An invoice for €2,000 is paid 45 days late by a German business. The base rates below are assumptions for the example. Look up the current rate before you calculate.

The interest formula is amount × annual rate × days ÷ 365. For the UK: 2,000 × 0.12 × 45 ÷ 365 = £29.59. For Germany: 2,000 × 0.115 × 45 ÷ 365 = €28.36.

GOV.UK says that if you add interest to the amount owed, you should send a new invoice. A supplier who wants the money should issue that new invoice rather than just mention it in an email.

What if you cannot pay on time?

If you cannot pay by the due date, contact the supplier before the date passes. Suppliers are far more willing to agree a short extension in advance than to forgive silence. Put the new date in writing.

Offer something concrete, such as a part payment now and the balance on a named date. A written plan protects both sides. It does not cancel the legal right to interest unless the supplier agrees in writing to waive it.

What if you pay too much or too little?

An overpayment is a credit on your account. Tell the supplier, then either ask for a refund or ask them to deduct the extra from your next invoice. A short payment is a debt for the remainder. The supplier can still chase the balance and, between businesses, charge interest on it. Section 288(5) BGB applies the €40 flat fee to partial payments as well. Always pay the full amount or agree the shortfall in writing first.

Paying an invoice in another currency

A foreign invoice states its currency. Pay the amount in that currency where you can. If your bank converts, the amount that lands may differ slightly from the invoice, because of the exchange rate and fees. Agree who bears the transfer fees. Many suppliers write "all bank charges to be borne by the payer" on the invoice.

For suppliers: how to get invoices paid faster

If you are the one waiting, the invoice itself decides how fast it is paid. Seven changes help.

1. Put the due date on the invoice, not only the terms.
2. Add the payment reference you want the client to use.
3. List the bank details clearly and include a payment link.
4. Send to the right person, usually accounts payable, with the purchase order number.
5. Send promptly. In the UK, HMRC says a VAT invoice should normally be issued within 30 days of the tax point.
6. State your late-payment terms and the statutory interest you may claim.
7. Follow up the day after the due date with a short, polite reminder.

The invoice should also be correct. A wrong total, a missing VAT number or an unclear description gives the client a legitimate reason to hold payment.

Pay or be paid in less time

Whether you are paying invoices or sending them, a clean document speeds up the money. Invoqk's invoice generator creates invoices with the due date, payment reference and bank details in the right places, and sends them by email as a PDF.