New Bill targets overdue invoices
The Government has introduced a landmark Bill to address late payments to small businesses. Ministers have described it as the biggest crackdown in more than 25 years. The legislation entered Parliament on 19 May 2026. It is formally known as the Commercial Payments Bill.
This announcement matters because overdue invoices continue to damage smaller firms. Many businesses already face higher wage costs, inflation and tighter margins. As a result, delayed payments can place serious pressure on cash flow. Government figures also suggest that 38 businesses close every day because they are not paid on time.
What the Bill would change
Under the proposed reforms, large businesses would have to pay smaller suppliers within 60 days. In addition, the Bill would require mandatory interest on overdue sums. The proposed rate remains 8% above the Bank of England base rate. Therefore, larger customers could face a clearer financial consequence for poor payment practice.
The Bill would also strengthen the powers of the Small Business Commissioner. For example, the Commissioner could investigate poor payment practices, adjudicate disputes and fine persistent offenders. Furthermore, the proposals would tackle retention payments in construction, where delayed settlement has caused concern for many years.
Why this matters for smaller firms
For many owner-managed businesses, these changes could offer welcome protection. Faster payment terms would support working capital and improve financial planning. Equally, mandatory interest may discourage larger customers from delaying settlement. Consequently, smaller firms may spend less time chasing debts and more time running the business.
However, the legislation still needs to complete the full parliamentary process. So, while the direction of travel is clear, businesses should not rely on legal reform alone. Instead, they should continue to strengthen their own systems and controls.
Practical steps to review now
Business owners may still wish to review:
- credit control procedures
- debtor monitoring systems
- invoice collection processes
- and cash flow forecasting arrangements
Strong internal processes remain important. They can reduce risk, improve visibility and support resilience. Moreover, they place businesses in a stronger position if disputes arise. When combined with future legal protections, these measures may help ease financial pressure.
The proposed reforms send a strong signal to the market. The Government wants tougher action on late payments and better protection for smaller suppliers. Even so, businesses should keep monitoring developments as the Bill moves through Parliament.
How we can help
If you would like advice on managing cash flow, strengthening credit control or preparing for the new rules, please get in touch with our team.
