What The Commercial Payments Bill Means For SMEs Still Waiting Over 60 Days

The Commercial Payments Bill is one of the most significant UK payment reform proposals in more than 25 years. It is designed to tackle late payments, which government research says cost the UK economy almost £11 billion a year and contribute to 38 business closures every day.

For SMEs currently dealing with customers who insist on 60-day, 90-day or longer payment terms, the Bill matters. It proposes a clear cap on payment terms, stronger rights to statutory interest, new consequences for late invoice disputes, and wider powers for the Small Business Commissioner.

But the detail matters. The Bill is not yet fully in force. It will not automatically fix invoices that are already overdue. It will not apply retrospectively to every existing contract. It also does not remove the need for strong credit control, clear paperwork and fast escalation when customers delay payment.

At the time of writing, the Bill is officially listed in Parliament as the Commercial Payments Bill [HL]. The government has also described it as part of its Small Business Protections package. It was introduced in the House of Lords on 19 May 2026, with a second reading sitting listed for 9 June 2026. This means SMEs should prepare now, but should not wait for the law to change before taking action on overdue invoices.

What The Bill Actually Does On Payment Terms

The 60-Day Cap

The Bill introduces a maximum payment period of 60 days for relevant commercial payments where the purchaser is not a public authority. For public authorities, the proposed maximum period is 30 days.

Once the relevant provisions are in force, contract terms that try to push payment beyond the permitted period may be void. Where a contract has no valid payment term, or the payment term is void, the Bill provides for a 30-day implied payment term.

That is a major shift for smaller suppliers. If a large customer tries to impose 90-day terms after the new rules apply, the supplier may have a stronger legal basis to challenge those terms rather than accepting them as a commercial reality.

However, the 60-day cap should be treated as a maximum, not a target. A customer paying on day 60 can still create serious cash flow pressure for an SME that has already paid staff, suppliers, tax, rent and operating costs.

The Exemptions

The Bill includes exemptions from the payment term restrictions. These include situations where both parties are large undertakings, where the purchaser is the smaller party, and other contract types that may be specified in regulations.

The government’s earlier consultation response also indicated that limited flexibility may be needed for some import and export arrangements. The final practical detail will depend on the legislation as enacted and the secondary regulations that follow.

This is important because key definitions, including the exact meaning of a large undertaking for these purposes, are expected to be developed through regulations. SMEs should therefore avoid assuming that every commercial relationship will be treated in exactly the same way.

The New Fixed Sum For Late Disputes

One of the most practical parts of the Bill is the proposed fixed sum for late invoice disputes.

The Bill targets a common delay tactic: a customer waits until the payment deadline is close, or has already passed, and then raises a vague dispute to avoid paying. Under the Bill, where a purchaser raises a relevant dispute too late, or raises it without enough information for the supplier to understand what the dispute is about, the supplier may be entitled to a fixed sum.

The proposed fixed sum is the higher of £40 or 1% of the contract price. If only part of the contract price is disputed, the 1% figure applies to the disputed amount.

That does not mean every dispute becomes invalid. Genuine disputes still need to be handled properly. But it does mean customers will have less room to use last-minute objections as a cash flow tactic.

What The Bill Does Not Fix

The Bill is a positive move for SMEs, but it is not a replacement for credit control.

SME-to-SME Late Payment Is Still A Problem

The strongest protections in the Bill are aimed at poor payment behaviour by larger businesses. The Small Business Commissioner’s current enquiry service is also focused on unresolved payment disputes where a small business is dealing with a larger customer.

If your late-paying customer is another SME, the Bill may not give you the same level of practical help through the Commissioner’s enforcement route. You may still need to rely on existing rights, formal correspondence, statutory interest, negotiation, debt recovery support and, where necessary, legal action.

Sixty Days Is Still A Long Time

A 60-day cap is better than open-ended or 90-day terms, but it is still a long wait for a smaller business.

Many SMEs operate on much shorter cash cycles. They pay wages weekly or monthly, settle supplier invoices quickly, pay VAT and tax on deadlines, and fund work before the customer pays. Waiting 60 days can still create avoidable pressure.

There is also a risk that some large customers treat 60 days as the new default rather than the legal ceiling. That is why SMEs should continue to push for 30-day or 45-day terms where possible.

The Bill Does Not Apply Retrospectively

The Bill contains provisions stating that certain payment term changes do not affect contracts entered into before the relevant provisions come into force.

This means you should not assume that an existing 90-day contract has already changed. If you are currently tied into long payment terms, review the contract, check renewal dates, and look for opportunities to renegotiate. Where invoices are already overdue under the current terms, use the legal and commercial options available now.

How The 60-Day Cap Interacts With Your Existing Situation

What You Should Do Right Now

Renegotiate Contracts Before 60 Days Becomes The Baseline

The best time to challenge long payment terms is before the work starts. Once goods or services have been delivered, your leverage usually drops.

Use the current direction of travel to push back on unreasonable terms. The government has made its position clear: long payment delays are damaging small businesses. That gives you a stronger commercial argument when asking for 30-day or 45-day terms.

Strong Contract clauses that reduce late payment remain one of the best ways to protect your business. Your contracts should clearly state payment dates, interest rights, dispute procedures, recovery costs and escalation steps.

Start Claiming Statutory Interest On Overdue Invoices

Your right to claim interest on late commercial payments already exists in many business-to-business situations. Statutory interest is generally 8% above the Bank of England base rate, although the position can depend on the contract and whether a valid alternative interest clause has been agreed.

The Bill is designed to make statutory interest harder to contract out of in future. But you do not need to wait for the Bill to act on overdue invoices today.

If a customer is late, calculate the amount owed, include any fixed compensation available, and make the claim clearly. A late payment act interest claim can change the tone of the conversation because it shows the customer that delay has a cost.

The Late Payment of Commercial Debts Act and what it covers in terms of interest and compensation gives you the full picture of what may be available under the current framework.

Issue Formal Demands Without Delay

Polite reminders are useful at the start. They are not a complete collections process.

When a customer is overdue and not engaging properly, a formal demand sets out the debt, the due date, the interest position, the deadline for payment and the next step if payment is not made.

A late payment letter service can be especially useful where the relationship has become stuck in vague promises, ignored emails or repeated excuses. It gives the customer a clear decision: pay, raise a properly explained dispute, or face escalation.

Document Delivery And Acceptance Properly

The Bill’s late dispute provisions make good record-keeping even more important.

If a customer later claims there was a problem with the work, you need evidence. Keep records of purchase orders, delivery notes, signed approvals, email confirmations, timesheets, project handovers, completed milestones and any customer acceptance.

This helps under the current law and will become even more important if the Bill’s dispute provisions come into force as planned.

Run Credit Checks On Key Customers

The Commercial Payments Bill will not protect you from customer insolvency. If a customer does not have the cash to pay, even the strongest payment terms may not recover the money quickly.

A company credit check service should not only be used when onboarding a new customer. It should also be used for existing customers that place large orders, ask for longer terms, start paying slowly, or become more difficult to contact.

Companies House checks for credit control can also help you spot warning signs, including late filings, changes in directors, charges, insolvency notices and other developments that may affect payment risk.

Strengthen Your Internal Credit Control Process

The businesses that benefit most from stronger payment laws will be the ones with strong internal processes already in place.

Aged debtors reporting that drives action gives you the visibility to spot late accounts before they become serious. Payment links for faster settlement can remove friction once a customer is ready to pay. The ultimate checklist for making an invoice that people actually pay helps ensure your own invoicing process does not create avoidable delays.

If your internal process is inconsistent, credit control outsourcing can help you apply a clear, professional system without relying on already busy internal staff to chase every invoice.

Escalate Persistent Late Payers Earlier

Court action can be slow, costly and disproportionate for many commercial debts. That is why escalation needs to happen before the debt becomes old, disputed or ignored for months.

Knowing when to escalate an invoice to debt collection services is one of the most important parts of credit management. The longer a debt sits unresolved, the harder it can become to recover.

A debt recovery collection agency can bring structure, urgency and experience to the process while allowing you to stay focused on running the business.

Where the customer raises a dispute alongside the overdue payment, a commercial debt dispute service can help address both the disagreement and the payment delay. Understanding set-off and counterclaims in business debt recovery is also useful if a customer claims they are entitled to deduct money from what they owe.

Bridging The Cash Flow Gap While You Wait

Even if the Bill progresses quickly, commencement dates and secondary regulations mean businesses will still need to manage cash flow under the current framework for some time.

Invoice finance can help unlock cash tied up in unpaid invoices, although it should be used carefully and with a clear understanding of fees, customer relationships and repayment terms.

If late payment is part of a wider cash flow issue, a structured plan to improve business cash flow may be more useful than chasing each invoice in isolation. 5 ways to get your customers to pay on time is a practical starting point for reviewing your current approach.

Businesses facing more serious pressure should speak to business recovery specialists early. Waiting until HMRC arrears, supplier pressure or payroll problems become urgent usually reduces the options available.

Use The Legislation As A Commercial Lever Now

The law may not yet be fully in force, but the commercial message is already clear. Long payment delays are under government scrutiny. Large businesses that continue to insist on excessive payment terms have less room to argue that this is normal or acceptable.

Use that in negotiation.

If a customer proposes 90-day terms, push back. If a procurement team says 60 days is standard, ask for 30 or 45. If a customer repeatedly pays late, refer to statutory interest, recovery costs and formal escalation. The Bill gives SMEs a stronger backdrop, but your process still needs to do the day-to-day work.

6 best practices in modern debt collection and building a transformative end-to-end collections strategy can help you move from reactive chasing to a more controlled system. How to completely overhaul your credit and collections process is worth reading if your current approach relies too heavily on reminders and goodwill.

FAQs

Does The Commercial Payments Bill Apply To All Businesses?

The strongest payment term restrictions are aimed at situations where larger purchasers are paying smaller suppliers. There are exemptions, including where both parties are large undertakings or where the purchaser is the smaller party. Further detail will depend on the final Act and secondary regulations.

What Happens To Existing Contracts With 90-Day Terms?

The Bill is not designed to retrospectively rewrite every existing contract. If your contract was entered into before the relevant provisions come into force, you should not assume the new cap automatically changes it. Review renewal dates, variation clauses and renegotiation options.

Can I Use The Small Business Commissioner Now?

If you run a small business in the UK and have an unresolved payment dispute with a larger customer, the Small Business Commissioner may be able to help. If your debtor is another SME, you may need to use other recovery routes.

Can I Claim Interest Now Or Do I Need To Wait For The Bill?

You do not need to wait for the Bill. In many B2B situations, statutory interest and compensation can already be claimed on overdue commercial invoices. The current position may depend on the contract, so check your terms and act promptly.

What If A Customer Raises A Dispute When Payment Is Due?

Ask for the dispute in writing, request full details, and separate the genuinely disputed amount from any undisputed amount. Keep records of delivery, acceptance and correspondence. Under the Bill, late or poorly explained disputes may carry financial consequences for the purchaser.

Is 60 Days Now The Standard Payment Term?

No. The proposed 60-day limit is a cap, not a recommended payment term. SMEs should continue to negotiate shorter terms wherever possible.

The Law Is Changing. Your Collections Process Should Change Now.

The Commercial Payments Bill is a genuine step forward for UK SMEs, but it is not a reason to wait. If you are already owed money, your current rights matter today. If you are signing new contracts, your payment terms matter today. If customers are stretching payment beyond 60 days, your credit control process matters today.

Taurus Collections is a collections company for small business owners and directors across the UK already trust. From formal demand letters through to full commercial debt recovery, our team works quickly and professionally to help you get paid.

Get in touch today to find out what we can recover and how quickly we can start.