Late payments are one of the most persistent problems facing small businesses in the UK. They damage cash flow, disrupt planning, and in some cases, force otherwise viable companies to close their doors. The government has now announced what it describes as the toughest crackdown on late payments in a generation, with new rules and enforcement powers designed to protect small firms and give them the confidence to grow.

Why late payments matter

According to government figures, poor payment practices cost the UK economy around £11 billion each year. For many small businesses, waiting weeks or even months to be paid by larger customers can create a serious cash flow crisis. On average, 38 UK businesses are forced to close every day because they cannot manage the impact of late or slow payments.

Key changes in the new plan

The new measures aim to ensure that businesses get paid promptly and fairly. They include:

• Stronger enforcement powers for the Small Business Commissioner, including the ability to issue fines.
• Mandatory maximum payment terms initially set at 60 days, reducing to 45 days over time.
• Invoice verification periods limited to a maximum of 30 days, stopping companies from dragging out the approval process.
• Audit committee oversight of payment practices at board level for larger companies, increasing accountability.
• A £4 billion finance boost for small businesses, including 69,000 Start-Up Loans to support growth and stability.

What this means for small businesses

These reforms are designed to tackle the culture of late payments head-on, giving small businesses more certainty over when they will be paid and improving their ability to plan ahead. Having predictable cash flow makes it easier to invest in staff, stock, and equipment without the constant fear of payment delays undermining operations.

Stronger enforcement also means that larger businesses will have to take payment obligations seriously, or risk reputational and financial consequences. The introduction of maximum payment terms and stricter invoice verification timelines should help ensure that suppliers are not kept waiting unnecessarily.

Taking action now

While these changes will offer significant protection, small business owners can still take steps to improve their own credit control and invoicing processes. Clear payment terms, prompt invoicing, and proactive follow-up can all help reduce payment delays.

With the government’s plan aiming to shift payment culture across the UK, small businesses should see a real difference in the months ahead. If you have concerns about how late payments are affecting your business, now is the time to review your credit control processes and take advantage of any new protections available.