The best way to deal with late payments is to act before an invoice becomes overdue. Agree clear terms, check customers before extending credit, invoice accurately, chase consistently and escalate persistent arrears rather than waiting months. October 2026 research highlights the urgency: Bibby Financial Services’ SME Confidence Tracker found that 60% of surveyed SMEs said customers were taking longer to pay than a year earlier. A predictable credit control process protects cash flow without damaging good customer relationships. Review responsibilities monthly to prevent missed reminders and broken promises.
What the Latest Reports Show
| Source | Finding |
|---|---|
| Bibby Financial Services SME Confidence Tracker, October 2026 | 60% of SMEs reported slower customer payments than a year earlier. Average outstanding invoices were £72,000, and 40% had shortened the terms they offered. |
| Coface UK Payment Survey 2026 | 89% of UK companies experienced payment delays during the previous year. Average delays reached 34 days, while agreed payment terms averaged 57 days. |
| Government-commissioned research, 2025 | An estimated £26 billion was owed late at any given time, with an estimated 38 business closures daily attributable to late payment. |
The Bibby and Coface results are survey findings, not measurements of every UK business. Bibby provides invoice finance, so its commercial perspective is worth recognising. Nevertheless, the reports point to mounting pressure: Coface found 57% of respondents expected payment delays to worsen, compared with 37% the previous year. Our article on how the £26 billion late payment crisis affects growth plans considers the wider consequences. Outstanding invoices include bills not yet overdue, unlike measured payment delays.
Eight Ways to Protect Your Cash Flow
1. Set clear terms in writing. The GOV.UK guidance explains that business-to-business payment periods are normally agreed within 60 days, although longer terms may be lawful if fair. Without an agreed date, payment generally becomes late 30 days after receipt of the invoice or delivery of goods or services, whichever is later. Make payment dates and applicable interest terms clear when contracting.
2. Credit check before you trade. Use credit checking and our guide to Companies House checks to understand financial risk. Set realistic limits, and review them as exposure grows. Our guide to onboarding new clients explains practical safeguards.
3. Invoice promptly and accurately. Include the agreed purchase order, correct customer details, amounts and payment date. Send invoices without delay, resolving discrepancies before they become disputes. Our guide to using technology to prevent late payment covers automated reminders.
4. Chase on a schedule, starting early. A consistent and documented timetable avoids missed follow-ups. Tailor the approach to contractual terms and customer circumstances. Keep copies of reminders, responses and promised dates in one accessible place.
| Source | Finding |
|---|---|
| Bibby Financial Services SME Confidence Tracker, October 2026 | 60% of SMEs reported slower customer payments than a year earlier. Average outstanding invoices were £72,000, and 40% had shortened the terms they offered. |
| Coface UK Payment Survey 2026 | 89% of UK companies experienced payment delays during the previous year. Average delays reached 34 days, while agreed payment terms averaged 57 days. |
| Government-commissioned research, 2025 | An estimated £26 billion was owed late at any given time, with an estimated 38 business closures daily attributable to late payment. |
5. Claim statutory interest and compensation. Eligible business creditors can claim interest and debt recovery costs. For debts becoming late between July and December 2026, the statutory interest rate is 11.75% annually, reflecting a 3.75% reference Bank Rate plus eight percentage points. A £10,000 invoice 30 days overdue accrues approximately £97 simple interest and may attract £100 fixed compensation. Different contractual remedies can affect entitlement. See our guide to claiming statutory interest.
6. Escalate before 90 days. Recovery prospects may deteriorate as invoices age, although quoted industry recovery percentages are not reliable forecasts for individual UK debts. Document unanswered reminders, assess disputes and escalate promptly. Our guide on when to escalate an invoice sets out triggers, while B2B debt collection tips cover practical approaches.
7. Limit your exposure. Consider deposits, staged payments, shorter terms for riskier accounts and suitable security beyond personal guarantees. Monitor customers whose outstanding balances represent a disproportionate share of your ledger.
8. Forecast cash weekly. Compare expected receipts with actual payments and update promised dates. Aged debtors reporting and credit control KPIs help reveal growing pressure before it affects payroll or suppliers.
Should You Use Invoice Finance?
Invoice finance can unlock cash from eligible receivables, but it involves fees and does not resolve persistent non-payment. Significantly overdue or disputed invoices may be excluded, while recourse arrangements can leave the business responsible for defaults. Our comparison of invoice factoring and debt collection explains the distinction. Where a debt is irrecoverable, VAT bad debt relief may be available if statutory conditions are satisfied.
What About the Commercial Payments Bill?
The Commercial Payments Bill proposes tighter payment terms, stronger late-payment provisions, restrictions on construction retentions and wider powers for the Small Business Commissioner. It provides for payment-term limits of 60 days for many private contracts and 30 days for public authorities, subject to legislative detail and exceptions. The UK Parliament bills page shows it progressing through the House of Lords, with third reading scheduled for 20 October 2026. It is not yet law; commencement dates remain uncertain. Our guide to the Commercial Payments Bill and SME cash flow explains the proposals.
When to Bring in Help
When chasing consumes staff time or a customer stops responding, specialist assistance may help. Outsourced credit control handles routine reminders and reporting, while Taurus Collections pursues eligible overdue accounts on agreed no win, no fee terms. Our construction debt collection team works with difficult payment chains, and international debt collection supports cross-border cases. Articles on UK SME profits and late payments and rising financial distress provide additional context.
Frequently Asked Questions
How do you deal with a customer who keeps paying late?
Review their creditworthiness, reset terms where appropriate, consider deposits and chase consistently. If agreed commitments continue to be broken, move to formal recovery before balances become seriously overdue.
Can I charge interest on late payments?
Yes, qualifying commercial debts can attract statutory interest and fixed compensation, unless applicable contractual remedies alter that right. Check the correct rate for the period when payment became late.
When should I use a debt collector?
Consider professional collection when reasonable reminders fail and payment is overdue. Acting promptly can preserve recovery options, although results depend on the debtor’s position. Where genuine disputes exist, resolve those issues before pursuing stronger enforcement measures against the customer.
What is a reasonable payment term?
Thirty days is common, while business terms beyond 60 days must generally be fair. Agree dates clearly and consider your industry and bargaining position.
Protect Your Cash Before It Slows Further
With many businesses reporting longer waits for payment, now is the time to review credit limits, chasing routines and overdue balances. Speak to our team for a free, no-obligation discussion about strengthening cash collection and recovering outstanding invoices.
