Late payments cost the UK economy an estimated £11 billion annually. To combat this, the government has responded to its recent consultation with a series of legislative changes designed to protect small businesses and tighten the rules for large “slow-paying” corporations.
Key Legislative Changes Coming Soon
The government intends to introduce several measures as soon as parliamentary time allows:
- Expanded Powers for the Small Business Commissioner: The Commissioner will now have the authority to investigate poor payment practices, settle disputes outside of court, and issue significant fines to persistent offenders.
- Stricter Payment Terms: A maximum payment term of 60 days will be imposed (with very limited exceptions).
- Mandatory Interest: All commercial contracts must include the right to statutory interest (8% above the Bank of England base rate).
- Invoice Dispute Deadlines: New statutory time limits will be set for raising disputes to prevent “stalling” tactics.
- Public Accountability: Boards of large companies with poor payment records must now publicly explain their performance and their plans for improvement.
- Construction Sector Reform: The practice of withholding retention payments in construction contracts will be banned.
3 Practical Tips to Protect Your Cash Flow Today
While we wait for these laws to take effect, you can take these three steps now to reduce the risk of overdue invoices:
- Make it Effortless to Pay
Confusion is a common cause of delay.
- Include your bank details clearly on every invoice.
- Add a prominent “Payment Due Date” at the top.
- Send your invoice the same day the work is completed while the value is fresh in the customer’s mind.
- Set Expectations Early
Don’t wait until the invoice is sent to mention terms.
- Confirm the price and payment terms in writing before starting work.
- Include these terms on your quotes and initial communications.
- If you require deposits or staged payments, frame them as a standard part of your business process.
- Follow a Consistent Chasing Routine
Taking the emotion out of debt collection makes it easier to stay on top of it.
- Day 1 (Overdue): A friendly email reminder.
- Day 7: A firmer follow-up asking for a specific payment date.
- Day 14: Mention your right to charge late payment interest under the Late Payment of Commercial Debts Act.
Disclaimer: The information in this article is provided for general information only and does not constitute legal or professional advice. We cannot accept responsibility or liability for any actions you may take, or not take, based on this information.