The issue of late payment is not just an administrative headache for businesses, particularly SMEs. It can have a profound impact on the day to day running of the business. For example: it can impact cashflow, supplier relationships, investment plans and day-to-day confidence.  The introduction of the Small Business Protections Bill in May 2026 has renewed focus on late, long and disputed business-to-business payments.

The Bill is still progressing through Parliament and, although it has not yet been implemented, the Government has said there will be an appropriate lead-in time, including a transition period, and that the measures will not apply retrospectively. However, businesses should not wait until the last minute. Now is a sensible time to review payment clauses, invoice processes and debt prevention procedures.  

What is changing? 

The proposed reforms include a maximum payment term of 60 days, subject to limited exemptions, and a mandatory right to statutory interest on late payments at 8% above the Bank of England base rate. The Bill also proposes stronger powers for the Small Business Commissioner, including powers to investigate poor payment practices, adjudicate disputes between small and larger businesses outside court, and take enforcement action where appropriate.  

A key practical change is the treatment of invoice disputes. The Government intends to give suppliers a right to a fixed sum where a purchaser raises a dispute late or without sufficient information. The policy aim is clear: disputes should be raised promptly and properly, not used as a tactic to delay payment.  

What does this mean for SMEs and mid-sized businesses? 

For suppliers, the reforms should provide stronger leverage against customers who insist on long payment periods or delay payment without good reason. That said, the reforms also mean that businesses buying goods or services from others need to ensure their own payment processes are organised, particularly if they deal with smaller suppliers. 

Your standard terms should be clear on: 

• when invoices can be issued; 
• when payment is due; 
• what information must be included on an invoice; 
• how and when invoice disputes must be raised; 
• whether interest and compensation apply to late payments; and
• any right to suspend services or withhold further supply. 

Our Corporate & Commercial team's recent contract-mapping review reinforced the value of clear contractual payment provisions. Explicit payment deadlines, late payment remedies, statutory rights and interest clauses can help drive prompt payment and minimise the likelihood of default.

Quick checklist: what should businesses do now? 

1. Check whether any standard payment period exceeds 60 days. 
2. Review interest and late payment wording. 
3. Make invoice dispute procedures clearer and quicker. 
4. Align payment terms across quotes, order forms, invoices and T&Cs. 
5. Review suspension, termination and debt recovery rights. 
6. Train finance and sales teams to avoid agreeing informal payment variations. 
7. Update onboarding checks so the correct legal entity is identified before credit is given. 

Need help reviewing your terms? 

Well-drafted payment terms can reduce disputes, improve cashflow and put your business in a stronger position if a customer does not pay. If your terms and conditions have not been reviewed recently, or if late payment is becoming a recurring issue, our Corporate & Commercial team can help you update your contracts and strengthen your debt prevention processes.