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Government unveils new tactics to tackle late payments for small businesses

2-minute read

Women in glasses sorting invoices in kitchen
Catriona Smith

Catriona Smith

28 November 2023

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The UK government has launched new measures aimed at tackling the issue of late payment of invoices to small businesses.

The announcement on 2 October comes as part of a Cash Flow and Prompt Payment review.

The strategy includes broadening the powers of the Small Business Commissioner and strengthening the Prompt Payment Code.

UK small businesses owed £32 billion in late payments

It’s estimated that more than £32.1 billion is currently owed to UK businesses, according to research from Simply Business.

Many are resorting to bank loans and using personal savings to keep their business afloat.

The same study found 30 per cent of businesses are owed as much as £45,000 at one time.

Government plans to improve payment reporting

Plans to legislate for better reporting around payment practices include new metrics for reporting so businesses can see the value of invoices and those paid late.

The construction sector will also need to report on retention payments for businesses.

The government is also planning to give more powers to the Small Business Commissioner, which will include investigating and publishing reports based on anonymous information.

Other measures include providing advice to small businesses on how to negotiate payment terms that better suit them, and highlighting the benefit of going digital.

Businesses will also be encouraged to use digital payment technologies and embed prompt payments as part of their ESG (environmental, social, governance) programmes.

Chase up late payments

Download this late payment letter template to chase up unpaid invoices.


Read more about how to manage late payments and look into the best accounting software to help you manage your books.

‘Helping firms to grow and prosper’

The government hopes the plans will free businesses from chasing payments and give them more time to focus on growth.

Secretary of State for Business and Trade Kemi Badenoch said: “I know that late payments are a massive barrier to growth and I am determined to fix that.

“The measures we’re announcing will take a big step towards making sure SMEs get their payments on time, helping firms to grow and prosper.”

The government says they’ll be working with partners and existing schemes such as Help to Grow and Growth Hubs to help deliver “an improved payment culture”.

Late payment reforms

The Chancellor Jeremy Hunt reiterated plans for improving the state of late payments for small businesses in his Autumn Statement.

This included an update to the Procurement Act to make sure 30-day payment terms are extended to all subcontractor invoices within the supply chain for public sector contracts.

He also revealed reforms that will require any company bidding for large government contracts to demonstrate that they pay their own invoices within an average of 55 days.

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Do these plans go far enough to tackle the late payment issue? Let us know in the comments below.

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Photograph: Andrii Zastrozhnov/
Catriona Smith

Written by

Catriona Smith

Catriona Smith is a content and marketing professional with 12 years’ experience across the financial services, higher education, and insurance sectors. She’s also a trained NCTJ Gold Standard journalist. As a Senior Copywriter at Simply Business, Catriona has in-depth knowledge of small business concerns and specialises in tax, marketing, and business operations. Catriona lives in the seaside city of Brighton where she’s also a freelance yoga teacher.

We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer

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