Late Payments: Protecting Your Cashflow and Getting Paid on Time You can make a perfectly profitable sale and still end up with a cashflow problem if the customer doesn’t actually pay you. By the time an invoice becomes overdue, you may already have paid staff, suppliers and even the tax associated with the work. The profit might exist on paper, but unfortunately you can’t pay the bills with an outstanding invoice. And this is far from a small problem. Research commissioned by the Department for Business and Trade and the Office of the Small Business Commissioner estimates that late payments cost the UK economy almost £11 billion a year . At any one time, around £26bn is owed to businesses in late payments , affecting more than 1.5 million businesses – around 28% of the UK business population . For those affected, the average amount outstanding is approximately £17,000 . Perhaps more concerning is the estimate that 14,000 businesses close each year because of late payments , while affected businesses spend an average of 86 staff hours a year simply chasing money they're already owed. There has been some improvement. Department for Business and Trade figures published in July 2026 show that large businesses paid suppliers in an average of 32 days during 2025 , with 15% of invoices paid late. When reporting began in 2018, that figure was 25%. But for SMEs in particular, protecting cashflow needs to start long before an invoice becomes overdue. When is a business payment actually late? The rules on late commercial payments apply to qualifying business-to-business transactions for goods and services. Where a payment date has been agreed, payment terms between private-sector businesses should usually be no longer than 60 days . A longer period can currently be agreed, but it must be fair to both parties. Public authorities are generally expected to pay within 30 days . If you haven't agreed a payment date, a commercial payment will normally become late 30 days after the later of the customer receiving the invoice or the goods or services being supplied. This is why clear payment terms matter. Simply putting "payment due" on an invoice isn't a substitute for agreeing proper terms beforehand. Your terms should establish when payment is due, how the customer can pay, what information they need to approve the invoice and what happens if they pay late. For larger projects, it may also make sense to use deposits, staged invoices or milestone payments rather than doing all the work before raising one large invoice. You may be entitled to charge interest Under the Late Payment of Commercial Debts (Interest) Act 1998, businesses can have a statutory right to charge interest when another business pays late. The statutory rate is 8% above the applicable Bank of England base rate . For these purposes, the reference rate is fixed for six-month periods. The Bank of England rate on 30 June applies from 1 July to 31 December, while the rate on 31 December applies from 1 January to 30 June. The Bank Rate was 3.75% on 30 June 2026 , making the statutory late-payment interest rate 11.75% a year for qualifying debts becoming late between 1 July and 31 December 2026. So, take a qualifying £5,000 invoice that becomes overdue during this period and remains unpaid for 45 days. At 11.75%, the statutory interest would be approximately £72.43 . Interest normally runs from the date payment becomes late until the customer actually pays. You do need to check your contract before applying statutory interest, though. If it already provides its own late-payment remedy or interest rate, the statutory regime may not apply. You may also be able to recover your costs Interest isn't necessarily the only amount you can claim. There is also fixed statutory compensation towards the cost of recovering a qualifying late commercial payment. For debts of up to £999.99, it's £40 . For debts between £1,000 and £9,999.99, it's £70 , and for debts of £10,000 or more, it's £100 . The charge applies to each qualifying late payment, and reasonable additional recovery costs may also be recoverable in appropriate circumstances. Going back to our £5,000 invoice, that could mean £72.43 in interest plus £70 fixed compensation – £142.43 in total , before any further qualifying recovery costs. Whether you actually charge it is also a commercial decision. Sometimes simply making customers aware that statutory charges can be applied is enough to encourage payment. Good credit control starts before the invoice The best way to deal with late payments is, where possible, to stop them becoming late in the first place. That starts when you take on the customer, not 60 days after you've invoiced them. Check new customers before extending significant credit. Companies House can provide useful information, as can proportionate credit checks. For larger contracts, you might also ask for a customer's full statutory accounts rather than relying solely on what's publicly available. Think about your exposure too. If a customer paid you one or two months late, could your business comfortably absorb it? Agree payment terms before starting work and make sure the customer has accepted them. Find out how their payment system works too, particularly with larger organisations where purchase orders, supplier registration, invoice portals and internal approval processes can all cause delays. Then invoice promptly and accurately . Waiting ten days to raise an invoice effectively gives your customer another ten days' credit. Make it easy to pay, use automated reminders where appropriate and don't be afraid to pick up the phone when something becomes overdue. A conversation can often uncover an approval problem or genuine dispute much faster than another automated email. Most importantly, have an escalation process. Decide when a reminder becomes a phone call, when further credit is suspended and when formal recovery action begins. "It's fine, they always pay eventually" isn't much comfort when the outstanding balance has quietly grown to a level your business can't afford. Check how larger customers actually pay If you're considering giving significant credit to a larger company, there's useful information available before you agree their terms. Large companies and LLPs falling within the reporting requirements must publish information about their payment practices at least twice a year. Current size tests include businesses meeting at least two of these thresholds: £54m turnover, £27m balance-sheet total and 250 employees . The published information can show how quickly a business normally pays, including the proportion of invoices paid within 30 days, between 31 and 60 days and after 60 days, as well as how many were paid later than the agreed terms. That's useful information when a prospective customer asks you for generous credit terms. The Fair Payment Code The old Prompt Payment Code has been replaced by the Fair Payment Code , administered by the Office of the Small Business Commissioner. There are three award levels. Gold requires at least 95% of all invoices to be paid within 30 days. Silver requires at least 95% to be paid within 60 days, including at least 95% of invoices to small businesses with fewer than 50 employees within 30 days. Bronze requires at least 95% of all invoices to be paid within 60 days. An award isn't a replacement for doing your own checks, but it can provide another useful indication of how a prospective customer treats its suppliers. What if an invoice is already overdue? Start by finding out why. Check that the customer received the invoice and has everything they need. Has it been approved? Is there a genuine dispute? When is payment actually scheduled? If the customer accepts the debt but is struggling financially, a written payment plan can sometimes achieve a better result than immediately reaching for legal action. Make sure any agreement clearly sets out the amounts and payment dates. If normal chasing gets you nowhere, you can move to a formal demand setting out the amount owed, original due date, any interest or recovery costs and a deadline for payment. Before starting court proceedings, consider the value of the debt, likely recovery costs and whether the customer can actually pay. Winning a court case doesn't magically produce money if the customer is insolvent. Help from the Small Business Commissioner The Office of the Small Business Commissioner provides free support to small UK businesses experiencing payment problems with larger private-sector customers. For its existing complaint service, a small business is one with fewer than 50 employees . In qualifying cases, the Commissioner can provide guidance, contact the larger customer and investigate an unresolved payment dispute. It's generally worth contacting the Commissioner before commencing court proceedings, as they may no longer be able to assist once legal action has started. Keep an eye on your debtors Credit control should be part of your normal financial management, not something you suddenly think about when the bank balance gets uncomfortable. Review your aged-debtor report regularly. Look at what's current, 30 days overdue, 60 days overdue and beyond. Changes in payment behaviour can provide an early warning that a customer is struggling. Your cashflow forecast should also reflect what happens in reality. If your biggest customer is contractually supposed to pay in 30 days but consistently pays in 45, forecasting the cash arriving on day 30 isn't particularly helpful. And remember: turnover isn't cash . Increasing sales can look great in the accounts, but if you're giving customers lengthy credit terms, rapid growth can actually increase pressure on working capital. Don't forget the VAT Late payment can create another headache if you're VAT registered. Under standard VAT accounting, you normally account for VAT based on your sales and purchase invoices even if your customer hasn't paid you yet. You can therefore find yourself paying HMRC VAT on money you haven't actually received. Eligible businesses can consider the VAT Cash Accounting Scheme, where VAT on sales is generally paid when customers pay you. For 2026/27 , businesses can generally join if estimated VAT-taxable turnover for the next 12 months is £1.35m or less , and normally have to leave if VAT-taxable turnover rises above £1.6m . There is a trade-off: input VAT is also normally reclaimed when you pay suppliers rather than when their invoices arrive, so the scheme won't suit everybody. If you've already accounted for VAT and a debt later becomes irrecoverable, VAT bad debt relief may be available. Among the conditions, the debt normally needs to have remained unpaid for at least six months after the later of the payment due date and date of supply, and it must have been written off in your VAT records. Claims generally need to be made within four years and six months of the later of those dates. The late-payment rules are changing There's another reason to keep an eye on this area. The Commercial Payments Bill was introduced in May 2026. As at 7 August 2026 , it had completed committee stage in the House of Lords but had not become law, with its report stage still to be scheduled. Current proposals include a firm maximum payment period of 60 days for many business-to-business contracts, subject to limited exemptions. The Government has indicated that this would begin no earlier than 2027. Possible exemptions include arrangements where both parties are large businesses, where the purchaser is the smaller party, and certain imports and exports. The Bill would also make statutory late-payment interest mandatory, strengthen the Small Business Commissioner's enforcement and dispute-resolution powers, and introduce greater scrutiny of poor payment behaviour by large businesses. For now, these are proposals rather than the current rules . Businesses will need to revisit their contracts and credit-control processes once the legislation receives Royal Assent and implementation dates are confirmed. Getting paid is part of running the business Late payment can't always be avoided, but you can reduce the risk. Clear terms, sensible credit limits, prompt invoices, regular debtor reviews and consistent chasing all help. And if an invoice does become overdue, understanding your rights around interest, compensation and recovery gives you more options. Most importantly, don't wait until an invoice is 60 or 90 days overdue before thinking about credit control. Getting the work is only half the job. Getting paid for it matters too. If you need help improving your cashflow, managing late payments or getting better visibility over your business finances, get in touch.

Student loan interest rates are changing again, with borrowers across every repayment plan seeing an increase from September 2026. The new rates, confirmed by the Department for Education (DfE), will apply from 1 September 2026 to 31 August 2027. There is some protection for borrowers on Plans 2 and 3, however, with the Government retaining a 6% cap which prevents the maximum rate reaching 7.1%. For Plan 1 borrowers , generally those who started undergraduate courses between 1998 and 2012, the interest rate will rise to 4.1%, based on the retail prices index (RPI). That compares with 3.2% in 2025/26, although it remains slightly below the 4.3% charged in 2024/25. Those on Plan 2 , broadly covering undergraduates who started courses between 2012 and 2023, will pay interest of between 4.1% and 6%, depending on their income. Without the Government cap, the maximum rate would have increased to 7.1%. For comparison, the maximum was 6.2% in 2025/26 and 7.3% in 2024/25. Plan 3 postgraduate borrowers will also pay 6%. Again, the cap prevents the rate reaching 7.1%, compared with rates of 6.2% last year and 7.3% the year before. Finally, Plan 5 applies to borrowers who began undergraduate courses in 2023 or later. Their interest rate will increase from 3.2% to 4.1% for 2026/27, still slightly below the 4.3% charged in 2024/25. Of course, student loans don't work in quite the same way as conventional borrowing. What you actually repay is determined by the rules and income thresholds for your particular plan, rather than simply by the size of the outstanding balance. Nevertheless, with rates increasing across the board, it is worth knowing which plan you're on and understanding how the system affects your wider finances – particularly if you're considering whether making additional repayments makes sense. Not sure how your student loan fits into the bigger financial picture? Get in touch and we can talk through the numbers.