New late payment rules are coming. Can your books back you up?
New late payment rules are coming. Can your books back you up?
The government has set out what it's calling the toughest crackdown on late payment culture in over twenty-five years, and it’s due to become law late this year or early 2027.
The legislation is still working its way through Parliament, but the change is clear: a sixty-day cap on how long large firms can hold out payment to smaller suppliers, interest automatically due when payment runs late, and new powers for the Small Business Commissioner to investigate and fine businesses that make a habit of paying behind schedule.
This will be music to the ears of the small businesses who have been almost crippled by payments that arrive at a snail's pace.
The Scale of the Problem
It’s a widespread problem, with a troubling number of SMEs already dipping into emergency funds just to cover the gap that late payment leaves behind, and the UK economy loses an estimated £11 billion a year to it. This isn't a policy story happening somewhere else. It's the exact position I keep seeing clients tangled up in.
One business I know, turning over around £600,000, recently put together a deal with a well-known UK brand. The terms on offer were ninety days. It wasn’t up for discussion, just the price of being in the race. For a business that size, ninety days of unpaid work sitting on the books before a penny lands is a big deal. It's the cash flow plan for a whole quarter, dictated by someone else.
New rules only work if you can prove your position
Is there a catch? Well, kind of, but you can eradicate it. Claiming the interest you're owed, escalating a dispute to the Commissioner, or even just chasing a payment with any real confidence, all depend on knowing exactly what's owed, by whom, and since when. A rough sense that a client is behind somewhere doesn't hold up when you need it to. This is where an aged debtors report moves from a piece of accounting paperwork to become leverage.
The muddling through problem
Often, when we take over the bookkeeping, it’s being done by the owner or an office manager. Someone with some skills and knowledge, but it isn't their actual job. The problems arise when things get more complex or time-consuming, and it’s just not that person’s main priority.
Good credit control is more about discipline than complexity, but it can get cumbersome if you have a lot of customers or a lot to chase. Add to that the fact that it’s a secondary job for someone, so it’s reactive instead of proactive. Instead of a system running in the background, it becomes something that gets squeezed in whenever there's a spare moment, which in a busy business is not often enough.
Done properly, it looks different. A statement goes out, and then the invoice becomes due. If it's not paid, reminder emails go out at set intervals. If it remains unpaid, it escalates to a phone call. You might even get in touch before the due date, a polite check that the invoice has arrived and the payment date's still on track. It sounds like a lot of steps, but it's a process that can be systemised and mostly automated, so you’re not relying on someone remembering to chase.
This isn't just about credit control, though. If someone's doing the bookkeeping around other things, it's not their priority, which means the bookkeeping as a whole slips and for businesses growing into the millions, that can cause real problems.
What good looks like
Good bookkeeping is the foundation everything else gets built on. It tells you what you're owed, what you owe, where the cash is going, and whether the numbers you're using to make decisions can be trusted.
When any client comes on board, the first thing we do is check the bookkeeping, and that’s whether we end up delivering it ourselves or working alongside a team that's already in place. Once a business has grown past around half a million pounds in turnover, on the way to one, two, three million and beyond, bookkeeping can't be a task that gets fitted in whenever somebody has a spare hour. There are too many transactions, too many moving parts, and too much riding on the information being accurate and current.
Strong, timely bookkeeping gives a business a stable financial base. Invoices raised and chased. Suppliers and payments under control. The bank reconciled. The numbers current, so you know where you stand without having to go looking for the answer. Then when circumstances shift, whether that's new late payment legislation, a cash squeeze, a big customer opportunity, or a decision about the next stage of growth, you're not scrambling to work out what's going on. You've already got what you need to act.
Close
Could you easily show proof of the repeat offenders for late payments? Do you feel confident that your bookkeeping is a priority and can give you accurate answers when you need them?
If growth is on the cards, financial stability is an absolute must. Get the firm foundations in place so you can grow with confidence from there.
Check out our Bookkeeping services for more information, or book a free chat to talk through where your numbers stand right now.
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