Positive Steps to Tackle Late Payments Culture and Protect SMEs
The late payments culture is persisting, causing significant problems for SMEs. Larger businesses need to reexamine their payment culture and note that the government plans further action to tackle the problem.
An indication that persistent late payments is unacceptably rife comes in the recent appointment of a Small Business Commissioner, with a specific remit to tackle late payments. This is in spite of existing requirements that large companies and LLPs must disclose their payment practices and performance.
Under the Reporting on Payment Practices and Performance Regulations 2017 (and subsequent amendments), large UK companies and LLPs must produce a report twice a year with details including the average time taken to pay invoices, and the percentage of businesses paid on time. Such reports are published online. Directors failing to report their payment practices could face criminal prosecutions and unlimited fines.
The rules are clearly not sufficient: the Government is planning further steps, including new legislation requiring companies to include details of their payment practices in their annual reports (in the government’s words, “how they treat small firms”). Enforcement will also be stepped up.
In June 2025, Emma Jones took up the role as small Business Commissioner tasked with taking a leading role in tackling late payments and unfair payment practices. The ACCA has said that dealing with ongoing and systemic late payment practices will be a tough job for her. A consultation on the proposed legislation is expected any time.
What’s the issue?
Late payments can be far more serious than a mere inconvenience; it can prove fatal to a business. According to research by Intuit QuickBooks, SMEs were owed on average £21,400 in late payments in 2024. Separately, the government says more than 50,000 businesses close each year as a result of the late payments culture.
Does this mean the Fair Payment Code, implemented last Autumn, is also making little impact? The Code is voluntary and businesses are incentivised to pay 95% of invoices within 60 days; and 95% of invoices to SME suppliers within 30 days. Around 5,000 large businesses have apparently signed up to the Code, but does that mean anything in practice?
Simply Business has said it found 97% of more than 900 small business owners saw no reduction in late payments since the Code was introduced; and 12% actually saw an increase in late payments.
Recently, the Federation of Small Businesses (FSB) surveyed 2,000-plus small business owners and concluded that there is an urgent need for better payment practices and solutions to ease the burden on small businesses. SMEs were attempting to deal with the problem by adopting various methods, such as implementing stricter payment terms, charging late fees, and adopting automated payment methods.
The entire business community should be concerned at the ongoing problem. Larger businesses should reexamine their payment practices and remember that they were once a small business. More is going to be expected of them soon.
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