After years of warm words, consultations and voluntary codes, late payment is finally back on the legislative agenda.
As confirmed by the recent King’s Speech, the government has tabled The Small Business Protections (Late Payments) Bill – the first attempt to use the statute book to clamp down on late payments in nearly 30 years.
The Bill proposes a 60-day maximum payment term for large businesses paying SMEs, mandatory statutory interest on all overdue invoices, and stronger powers for the Small Business Commissioner (SBC) to investigate and fine persistent late payers.
Three big questions the Late Payments Bill raises
On paper, all of that sounds like progress. But it would be naive to pretend that these suggested measures will miraculously cure one of the oldest and most damaging habits in British business. Not when they leave so many big questions unanswered.
The first is: why 60 days? Why should it be permissible in law for a business to withhold payment from a supplier for up to two months after work is delivered or an invoice sent? Late payments are a problem because they cause cash flow issues. For many small firms, contractors and suppliers, 60 day terms will do nothing to ease cash flow pressures.
The second hole in the proposals is their scope. They make it very clear that the legislation is aimed at tackling cases where large companies fail to pay smaller businesses on time. But it’s a well-worn myth that late payments are purely a big-company-versus-little-company problem. That’s simply not true. SMEs pay other SMEs late all the time. Any serious attempt to tackle late payment culture has to recognise that reality.
The third issue is enforcement. Stronger powers for the SBC sounds encouraging, especially if large fines are on the table. But enforcement only works if there are enough resources behind it. The SBC is a small office that employs 12 people. It will struggle to investigate and prosecute a tiny fraction of the thousands of persistent late payment offenders.
On top of that, you’ve got the issue of the chronically congested court system. How long will it take to secure a prosecution of these late paying companies, particularly after you factor in appeals processes etc? This matters because serial late payers are masters of delay tactics. They already thrive on stretching terms, ignoring reminders, disputing invoices late in the day, and calculating that suppliers will eventually lose the will to keep chasing. They will play exactly the same game with attempts to prosecute them.
Rely on no one but yourself
So yes, we can cautiously welcome the Bill. Anything that puts late payments higher up the political agenda is a step in the right direction. But businesses should not build their cash flow strategy around the hope that the government is about to abolish late payments all together.
The only thing you can rely on to protect yourself from late payments is your own vigilance. The basics still matter most: clear payment terms, prompt invoicing, proper credit control, written records, and early action when an invoice becomes overdue.
If a customer is not paying, you can’t afford to wait for anyone else, let alone new legislation crawling its way through Parliament. If an immediate reminder as soon as a payment becomes late doesn’t get a response, take advice from a professional debt recovery service. The longer a debt is left unresolved, the harder it becomes to recover. The law might change. But you’re still the only one in a position to act.
