Late payment has long been one of the biggest challenges facing UK businesses. For years, it has been accepted as simply part of commercial practice — particularly in sectors with complex billing or long supply chains such as logistics and freight, where invoices are high-volume, complex, and often disputed.
The UK Government has announced the most significant reform to late payment legislation in over 25 years. The intention is clear: to protect businesses from being used as a source of free credit and to fundamentally change how and when invoices are paid.
While the legislation is not yet in force, the direction is clear - and many businesses are already starting to adapt their approach to payment practices and overdue debt.
For finance leaders, this is not just a policy update - it is a shift that will directly impact cashflow, risk exposure, and internal processes.
What is changing? A stronger, more enforceable Late Payment framework
The reforms build on the existing Late Payment of Commercial Debts (Interest) Act but introduce stricter rules and meaningful enforcement.
1. A stricter cap on payment terms
Payment terms will now be capped at 60 days, with limited exceptions.
This removes the flexibility that has historically allowed extended terms of 90 days or more - a common pressure point for suppliers.
2. Statutory interest becomes non-negotiable
Under the current framework, statutory interest (8% + Bank of England base rate) can be diluted or excluded through contract terms.
Under the new approach:
- Statutory interest will become mandatory
- Businesses will no longer be able to contract out of it
This marks a fundamental shift - late payment will automatically carry a financial consequence.
3. Stronger enforcement powers
The Small Business Commissioner will gain enhanced authority to:
- Investigate poor payment practices
- Enforce compliance
- Issue financial penalties for persistent offenders
This moves the legislation beyond guidance and into active enforcement.
4. Greater transparency and accountability
Large organisations will face increased scrutiny, including:
- Reporting on payment performance
- Disclosure of interest owed versus interest paid
- Clear accountability at board level
Late payment will become a governance and reputational issue, not just an operational one.
5. Limits on delaying tactics
Proposals also include stricter timeframes for raising disputes — preventing invoices from being delayed indefinitely through late-stage challenges.
Why this matters: a shift in the balance of power
For many years, late payment has disproportionately impacted smaller suppliers, often forced to absorb delays to maintain relationships.
These reforms aim to rebalance that dynamic.
For creditors, this creates:
- Stronger legal footing
- Faster routes to resolution
- Clearer financial consequences for non-payment
For debtors, it introduces:
- Increased cost of delay
- Greater visibility of payment behaviour
- Heightened regulatory risk
What this means for finance leaders
The practical implications are immediate.
1. Credit control strategies must evolve
Traditional approaches that rely on extended payment terms or informal escalation will become less viable.
Finance teams will need to:
- Review and tighten payment terms
- Ensure processes align with the new framework
- Escalate overdue accounts more consistently
2. Late Payment interest will become part of standard recovery
Applying statutory interest will no longer be a commercial decision — it will be an expected part of the process.
This creates an opportunity to:
- Offset recovery costs
- Improve overall return on overdue accounts
- Encourage earlier engagement from debtors
3. Early-stage intervention becomes critical
With reduced flexibility around disputes and delays, the early stages of the collections cycle become more important than ever.
Ensuring:
- Accurate data
- Clear communication
- Structured escalation
…will directly impact recovery outcomes.
4. Increased scrutiny from stakeholders
Payment performance will become more visible — both internally and externally.
CFOs and Finance Directors should expect:
- Greater focus from boards and procurement teams
- Increased supplier challenge
- Potential reputational implications
Where Controlaccount adds value
At Controlaccount, we have always aligned our recovery strategies with both commercial outcomes and regulatory best practice. These changes reinforce the importance of a structured, compliant approach to debt recovery.
We support clients by:
- Applying Late Payment legislation effectively and proportionately
- Delivering a graduated recovery process that protects customer relationships
- Providing clear visibility of performance, payments, and outcomes
- Advising on when and how to escalate accounts for maximum recovery
Our approach ensures that clients can:
- Recover overdue sums efficiently
- Remain compliant with evolving legislation
- Maintain control of customer experience
While the reforms introduce new obligations, they also create a significant opportunity.
Businesses that adapt early will benefit from:
- Improved cashflow
- Reduced debtor days
- Stronger commercial discipline
Those that do not risk:
- Increased exposure to late payment
- Operational inefficiencies
- Regulatory and reputational pressure
Final thoughts
The UK’s late payment reforms represent a decisive move away from tolerance of delayed payment - towards accountability, transparency, and enforcement.
For finance leaders, the question is no longer whether to act, but how quickly processes can be aligned to the new reality.
Need support navigating the changes?
Controlaccount works with organisations across multiple sectors to recover overdue debt in a way that is effective, compliant, and commercially sensitive.
If you would like to understand how these changes could impact your business - or how to strengthen your current recovery strategy - our team would be happy to help.
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