Commercial Payments Bill proposes 60-day limit for big firms

Large businesses would have to pay UK small suppliers within 60 days, subject to limited exemptions, under the Commercial Payments Bill, which was reported to be progressing through Parliament on 7 October 2026. The proposals also include compulsory interest on overdue payments and stronger enforcement powers.

The changes would address a problem that has forced some suppliers to borrow to meet wages and their own bills. Business owners interviewed by SmallBusiness.co.uk described repeated invoice chasing, customers changing payment arrangements and debts remaining outstanding after work had ended.

What happened

The bill would place a maximum payment period on transactions between larger businesses and smaller suppliers. Its proposed 60-day ceiling would limit the terms large customers could require those suppliers to accept, although the source does not detail the exemptions.

Interest on overdue invoices would become mandatory rather than something suppliers have to decide whether to pursue. A separate measure would impose a deadline for challenging invoices, restricting customers’ ability to raise disputes late in the payment process.

The Small Business Commissioner would gain powers to investigate late payment and impose financial penalties for non-payment. The proposed package therefore combines restrictions on contract terms with measures covering both disputes and enforcement.

These remain proposed changes, not rules already in force. No commencement date, penalty amounts or detailed timetable for the bill’s remaining parliamentary stages is given in the report.

The background

Under the existing framework described in the source, agreed payment periods are normally within 30 days for public authorities and 60 days for business transactions. Where no date has been agreed, the source gives a 30-day period running from the invoice being issued or the work being delivered, whichever is later.

Small businesses can already claim statutory interest on overdue business-to-business payments, calculated by reference to the Bank of England base rate. That statutory route is not available where the contract specifies a different interest rate.

Suppliers can also add a fixed recovery charge, with the amount depending on the size of the debt. When interest is added, the customer should receive a revised invoice showing the increased amount owed.

The legislation was initially called the Small Business Protections (Late Payments) Bill. Its development follows longstanding concerns about the negotiating imbalance between small suppliers and customers able to dictate lengthy payment terms.

Carillion, before its collapse, required suppliers to accept 120-day terms, according to the source. That example illustrates the distinction between an invoice becoming overdue and a supplier having to fund a long wait that was written into the original agreement.

The consequences extend beyond the missing cash. Time spent pursuing invoices reduces owners’ capacity to develop their businesses, while some turn to overdrafts, loans or friends and family. Others write off debts rather than continue trying to recover them.

What people are saying

Steve Noble, chief operating officer at Ultimate Finance, argues that prevention should begin before a contract is signed. He recommends checking a prospective customer’s trading behaviour and payment record rather than allowing the prospect of a significant order to displace basic due diligence.

Noble also advises suppliers to negotiate terms that their own cashflow can support. An arrangement manageable for a large customer may leave a smaller business unable to cover the costs of fulfilling the work while awaiting payment.

He places responsibility for customer relationships partly with finance teams, not solely with sales staff. Confirming that an invoice has arrived and asking when it will be paid can establish a direct route for follow-up before a payment becomes overdue.

His contingency recommendations include assessing access to bank borrowing or invoice finance. He also identifies debtor protection as an option if the problem persists, while distinguishing it from protection against the initial payment delay.

Rebecca Todd, former owner of Social Vine, described a different vulnerability: undertaking work without a written contract or service-level agreement. Her business provided social media marketing support to independent hospitality and tourism companies, and she said she had not understood those documents when starting out.

Todd’s account concerned a client relationship running from October 2017 to April 2018. Even the advance payment for the initial marketing strategy arrived two weeks late, before the customer commissioned ongoing social media management for a monthly fee.

The monthly arrangement required payment in advance, but no payment arrived in January. Todd said responsibility for dealing with her was transferred from the owner to a newly appointed manager, making the pursuit of the outstanding invoice more difficult.

When she contacted the owner directly, she was told the terms had changed to 30 days. The overdue money arrived at the end of February, two months late; subsequent payments for February and March were also delayed.

April’s payment remained outstanding when Todd gave her account. Explanations included a misplaced invoice and a staff member’s month-long holiday, while a later demand produced an automatic reply saying the manager had left. Todd said her invoicing application showed the invoice had already been read.

Despite encountering late payments every month, Todd said her cashflow had not been affected. Her recommendations were to document the agreement, use software that records invoice receipt and reading, and intervene sooner than she had. She found personal text or WhatsApp reminders particularly effective.

Custom Planet reported more direct financial consequences. The business said it had previously borrowed to pay staff or suppliers because of bad debts, although that had not happened recently at the time of its account.

The company described daily payment chasing, with some invoices passing 30, 60 and 90 days. Once debts exceeded 120 days, it considered recovery particularly difficult. Customers commonly attributed their delays to waiting for payments from their own clients.

Custom Planet said it had tightened its approach over time and recommended assigning collection work separately from sales where possible. It favoured discussing genuine cashflow difficulties and agreeing repayment plans, but said suppliers also needed to be prepared to pursue court action.

What happens next

For businesses with unpaid invoices now, the source recommends checking the invoice for errors before beginning escalation. Its suggested sequence starts with an email on the first overdue day, a firmer message a week later and a telephone call around the three-week point.

Where interest is claimable, the Small Business Commissioner’s calculator can help establish the amount. The commissioner can also help resolve a payment dispute provided legal proceedings have not already begun.

If the customer is struggling financially, an agreed instalment arrangement should be recorded in writing. A debt collection agency is another option when direct approaches fail, presented in the source as a last resort rather than the opening step.

The administrative burden is also prompting calls for small firms to trial AI when chasing overdue invoices. In the supplier accounts here, however, the immediate actions centre on clear records, named contacts and a consistent escalation process.

The next legislative question is whether the proposed payment cap, mandatory interest and expanded commissioner powers become law. Until then, businesses pursuing debts must distinguish those planned protections from the contractual terms and recovery options currently available.