The scourge of late payments

Late payments are still being used as a cashflow lever by big firms, with small suppliers reporting waits of up to 120 days to get settled, business owners have claimed.

Terms of up to 120 days are still being imposed on small suppliers by some major corporates, despite a fresh government push to clamp down on poor payment practices, experts have revealed.  

Late payments are estimated to cost the UK economy almost £11bn a year, with 14,000 firms closing annually as a direct result, according to research commissioned by the Department for Business and Trade and the Office of the Small Business Commissioner. The same research estimated firms are owed around £26bn in late payments at any given time.

The government is consulting on measures including tighter board-level scrutiny, mandatory statutory interest on late invoices, a 30-day deadline to dispute invoices, and extra enforcement powers for the Small Business Commissioner, according to consultation documents published on GOV.UK.

Astrid Davies, Founder CEO at ADCL, said bigger firms were the worst offenders. “The bigger the corporate entity, the longer they choose to hold onto their money before they settle what they owe,” she said, adding she had “heard of 120-day terms from some big companies” and had personally waited that long to be paid by a “Top 10 Accounting firm”. Davies said SMEs were treated disposable. “SMEs are seen as the bottom of the pile by Govt and big business. No one cares, which is unwise given the role SMEs play in the UK economy. Ignore us at your peril!”

Ministers have been consulting on a package of proposed measures aimed at late, long and disputed business-to-business payments, including extra powers for the Small Business Commissioner, according to the government’s consultation paper.

Tony Robinson OBE, at Be More Happipreneur, said he has campaigned for “#PayIn30Days or less” for more than 30 years. He said: “They will not act to help us, because the FTSE350 make too much money from unfair 45 to 120 days payment terms. It really is the easiest way to make money. Get the goods or services, use them, and (on average) don’t pay for them until at least 60 days after receipt.”

Sam Kirk, Managing Director at Retford-based J-Flex Rubber Products, said extended terms are often “dictated” by larger organisations, leaving SMEs feeling they have little choice but to accept what becomes “the norm”. He said: "Late payments have a serious impact on SMEs like us. While it is not exclusively the case, it is often larger organisations that dictate extended payment terms - this happened to us just last year, and what's even more frustrating is watching these massive corporate-types post record levels of profit at the end of their financial years.

“Part of the problem is that smaller businesses feel they have little choice but to accept this practice as the norm, worried that any pushback could jeopardise future work.”

Michelle Lawson, Director at Fareham-based Lawson Financial, said late payments blur into something more basic than business admin. “Invoicing dates mean nothing, payment terms mean nothing,” she said, describing overdue invoices as real-life money for “rent, food, roof over the head” as well as the “relentless costs” of keeping a business running.

She said: "I have now realised that people do what they want and when they want. Invoicing dates mean nothing, payment terms mean nothing. Only those self-employed will know the impact of this sadly, especially for smaller businesses.

“These payments are rent, food, roof over the head, football training, dance lessons and the relentless costs to keep a business operational. As a small business, you have less leverage to fight so the only option is to accept.”

Some owners said the cost is not just cash flow, but the hours lost to chasing and the damage it does to relationships.

Colette Mason, Author & AI Consultant at London-based Clever Clogs AI, said she has changed her terms this year to payment upfront because of late payment issues. She said the impact includes “lost time, aggravation, souring of relationships, and the ‘thought tax’ from the distraction adds to the problem too”.

Patricia McGirr, Founder at Burnley-based Repossession Rescue Network, said she is “reluctantly” taking a company to court for non-payment of a five-figure sum for work carried out in 2025. She said the “time, hassle, and cost” of recovering what is owed piles pressure on already-stretched operators.

Patricia said: "SME’s and self-employed operators are often most at risk from late payments. Cash flow is key to all businesses, but when you have a problem, it has a knock-on effect to everything from paying essential bills like phone and broadband to paying yourself and staff. 

"In my own case, I’m having to reluctantly take a company to court for non-payment of a five-figure sum for work that was undertaken in 2025. The time, hassle and cost of getting paid what is due just adds to the challenges of being in business. No one wants to face chasing what is owed, but getting paid on time seems to be a bit of a game at the moment."

Colin Crooks MBE HonDsc, CEO at Intentionality, said an international airline’s “buried 80-day payment terms nearly killed” his startup, forcing him to borrow from friends to survive. He said large firms use payment terms as “interest-free loans”, and argued that change will only come when late payment becomes a “boardroom liability”.

Colin explained: “My business eventually grew to 15 employees despite this corporate abuse of power, not because of any government protection. Large firms weaponise payment terms as interest-free loans while small businesses suffocate, and until late payment becomes a boardroom liability rather than a CFO strategy, nothing will change.”

Debbie Porter, Managing Director at Bakewell-based Destination Digital Marketing, said she has seen a sharp deterioration in payment speed. She said her “average debtor days” rose from 37 last financial year to 168 this financial year, and argued small suppliers can become invisible inside large finance departments because their invoices are tiny compared with big-ticket contracts.

"Last financial year, the average debtor days reported in my accounting software was 37 days, and this financial year it is 168 days, an increase of almost 350%.

"Successive governments have promised to tackle late payments, and there is already the ability to claim interest and debt recovery costs if another business is late paying for goods or a service. But big businesses that routinely pay late don’t really care. 

"If you are a small business supplying to a large business that is a late payer by its own internal policies, your invoice is actually quite small in comparison to the contracts that are costing them megabucks. So the accounts department neither notices nor cares that your relatively small invoice is sitting alongside all the others that they have the policy of late paying on as part of their own cashflow policies. 

“The only line of defence for a small business is to have cash in reserves, to ease the burden on your own cash flow.”

The government says it wants to create a faster-flowing payment culture, pointing to planned reforms and the Fair Payment Code, which replaced the Prompt Payment Code and uses tiered awards for firms paying suppliers quickly, according to the consultation paper.