The measures include a 60‑day cap on payment terms, mandatory interest on overdue invoices, and new powers for the Small Business Commissioner to investigate and fine larger firms that persistently pay late, along with a consultation into the potential to ban retentions on construction contracts.

These aren’t small tweaks. They’re a direct response to a problem costing the UK economy and estimated £11 billion every year, with 38 businesses closing their doors every single day because they aren’t paid on time.

But the real question is: What does all this mean for you?

What these changes mean for SME owners

You already know the pain late payments cause - the cashflow squeeze, the juggling act with suppliers, the uncomfortable conversations about wages or investment plans. The government’s reforms won’t miraculously stop late payment overnight, but they do shift the power back in your favour.

Here’s the impact in real terms:

• More certainty: With clearer, enforceable payment timeframes, you can plan with more confidence.
  
• Stronger backing: If a larger customer drags their feet, you’ll have government support that simply didn’t exist before.
  
• More leverage: Mandatory interest means late payments now come at a cost - for them, not you.

These changes won't remove every cashflow challenge, but they should start moving the dial in your favour.

Don’t wait for the law to fix cashflow

The reforms are helpful, but they aren’t a silver bullet. The truth is, healthy cashflow starts with your internal habits, not government policy.

Here are a few simple, high‑impact steps you can take (without giving away all the secrets our advisers share with clients):

1. Make it effortless for customers to pay you
   Clear invoices. Easy payment options. No unnecessary friction. Small tweaks can shorten payment time dramatically.
   
2. Chase smart, not hard
   Polite, consistent reminders work wonders - especially when they’re automated so you’re not spending valuable time chasing.
   
3. Spot trouble early
   A good cashflow forecast shows warning signs before they become crises. The earlier you see a problem, the more options you have to fix it.
   
4. Know your chronic late payers
   Some clients will always push boundaries. You may need tighter terms, deposits, or in some cases, a rethink of whether they’re worth the hassle.
   
5. Ts & Cs apply
   Ensure that your terms and conditions give you the right to act on late payment (even is this is at your discretion)

None of this is about being aggressive, it’s about protecting the business you’ve poured your time, money, and energy into.

A final thought…

The government’s reforms are a welcome step toward tackling late payments, but they won’t solve the problem on their own. The businesses that thrive will be the ones that take control of their cashflow now, rather than waiting for new rules to nudge others into doing the right thing.

If you want to reduce debtor days, streamline your credit control, or get tailored guidance on building a steadier, more resilient cashflow position, our team is here to support you.

Late payments shouldn’t stop you from investing, hiring, or simply having peace of mind at the end of the day. Get in touch with our SME team by emailing enquiries@rickardluckin.co.uk or visit our business advisory webpage  - we’ll help you put structure, confidence, and predictability back into your cashflow