To negotiate payment terms with customers, calculate what the extra waiting time costs, then propose a commercial exchange rather than simply refusing. You might request higher prices, staged payments, an agreed purchasing volume or stronger security in return for extended terms. Confirm every change in writing, assess the customer’s creditworthiness and monitor invoices closely. Coface’s 2026 UK survey found average agreed payment terms had risen to 57 days. One-third of large companies offered terms exceeding 90 days, compared with 12% of micro and small businesses. Those are survey findings, rather than legal limits or an indication that every large customer pays late. Negotiate before signing a contract, when parties can adjust dates and prices.
Why Larger Clients Push for Longer Terms
Lengthening terms allows buyers to retain cash for longer while suppliers fund the additional waiting period. Coface says larger organisations can absorb delays more easily, while smaller businesses are already managing cash flow on a knife edge. Bibby Financial Services reported in October 2026 that 60% of surveyed SMEs said customers were taking longer to pay than a year earlier. This makes careful negotiation increasingly important.
Year-end cash management can also prompt customers to request extensions, but it is better to examine your own collection history than assume a seasonal surge. Our article on the £26 billion late payment crisis explains the wider effect on business growth.
What Extra Days Actually Cost You
Before agreeing, calculate how much cash the change would tie up. Moving from 30 to 90 days means financing another 60 days of sales. The following illustrations assume steady annual sales, a 365-day year and an 8% annual funding cost. Substitute your actual borrowing or opportunity cost.
| Annual sales to the customer | Cash tied up by 60 extra days | Annual cost at 8% | Cost as % of sales |
|---|---|---|---|
| £100,000 | £16,438 | £1,315 | 1.3% |
| £250,000 | £41,096 | £3,288 | 1.3% |
| £500,000 | £82,192 | £6,575 | 1.3% |
If your operating margin is 10%, financing costs of approximately 1.3% of sales consume about 13% of that profit, before considering defaults or administration. This is a more useful negotiating argument than saying longer terms feel unfair. The precise calculation will differ when sales are seasonal or funding rates change. You should also allow for VAT timing, supplier payments and the staff time needed to chase invoices that remain unpaid after the due date.
How to Negotiate Payment Terms: Seven Steps
- Calculate the cost. Include the extra financing period, administration and possible non-payment.
- Understand your leverage. Consider the customer’s reliance on you, your alternative sales opportunities and concentration risk.
- Set boundaries. Decide your preferred terms, your fallback offer and when to reprice or decline work.
- Explain the business case. Show how reliable supply depends on sustainable working capital, without making accusations.
- Exchange concessions. Offer longer terms only where a price, volume or payment protection justifies them.
- Record the agreement. Confirm dates, invoicing procedures, interest provisions and how disputes will be handled.
- Review actual payments. Reassess the customer if payment slips beyond the newly agreed dates.
What You Can Trade for Longer Terms
| If they want | You could ask for |
|---|---|
| 60 days instead of 30 | A price adjustment covering additional financing |
| 90 days | Deposits or staged payments on larger contracts |
| Longer terms across the board | Minimum purchase volumes or a longer committed contract |
| Terms with no flexibility | An optional early-payment discount |
| Longer terms on large orders | A limit on your maximum outstanding exposure |
| Any extension | Clear late-payment interest and dispute provisions |
Be cautious with discounts. Giving a 1% discount for payment 30 days earlier has an annualised financing cost of approximately 12% before compounding. If borrowing costs less than that, the discount may be more expensive than finance; it becomes more attractive when your alternative funding is dearer. Compare the total cost with invoice factoring and debt collection, which solve different cash-flow problems.
Some wording you could use during negotiations:
- “We can offer 45 days if the committed order volume stays at the agreed level.”
- “For 90-day terms, we would need to reflect the financing cost in our prices.”
- “We can discuss a 1% discount for payment within 14 days, subject to the final order value.”
Use the Law and the Standards
You have a legal framework for the discussion. GOV.UK explains that business-to-business payment terms should generally be no longer than 60 days, although expressly agreed longer terms are possible if they are not grossly unfair to the supplier. Without an agreed payment date, payment normally becomes late 30 days after the invoice is received or goods or services are delivered, whichever is later.
Three other points can strengthen your negotiating position:
- Payment performance data. Qualifying large businesses publish how promptly they settle invoices. You can check their reports on GOV.UK before agreeing to unusually long terms. Reported averages are helpful context, not guarantees about your own invoices.
- The Fair Payment Code. Administered by the Small Business Commissioner, the voluntary scheme replaced the Prompt Payment Code. Gold requires at least 95% of invoices paid within 30 days; Silver and Bronze have different 30- and 60-day criteria. Check a customer’s actual award and payment performance.
- The Commercial Payments Bill. The Parliament bills page records legislation proposing tighter payment limits, stronger enforcement and a ban on construction retentions. It passed its House of Lords third reading on 20 October 2026 and was sent to the Commons; it is not yet law. Proposed exceptions and final wording remain subject to Parliament. Until it receives Royal Assent and the relevant provisions commence, use existing law and agreed contract terms when making decisions. Our guide to the Commercial Payments Bill and SME cash flow considers the proposals. The retention provisions particularly matter to businesses using our construction debt collection service.
If You Have to Accept Longer Terms
Some customers account for too much revenue to reject immediately. In that situation, manage the risks rather than accepting open-ended exposure.
- Check their credit. A recognised brand can still experience difficulties. Use credit checking and our guide to Companies House checks before increasing limits.
- Cap exposure. Set the maximum unpaid balance you will tolerate. Our guide to security beyond personal guarantees considers additional safeguards.
- Invoice immediately and correctly. Purchase order errors and late invoices increase the time before payment.
- Protect interest rights. Review the contract carefully and our guidance on claiming statutory interest. An agreed substantial contractual remedy can displace statutory rights.
- Monitor the account. Use aged debtors reporting and credit control KPIs to track actual performance.
- Consider funding. Our guide to using technology to prevent late payment and invoice finance articles explain ways to reduce administrative delays and bridge eligible receivables.
When a Large Client Pays Late Even on Extended Terms
Professional, consistent follow-up often protects a commercial relationship better than confrontation. Outsourced credit control can handle reminders while your sales team maintains its customer relationship. If promises are repeatedly missed, our guide on when to escalate an invoice and B2B debt collection tips outline a structured response. Taurus offers recovery on agreed no win, no fee terms, while international debt collection addresses overseas customers. Our articles on UK SME profits and late payments and rising financial distress explain wider pressures affecting buyers.
Frequently Asked Questions
Can a customer change my payment terms without my agreement?
Generally, contractual changes need agreement. However, continuing to perform after clear notification can sometimes amount to acceptance, depending on the contract and conduct. Object promptly in writing if you disagree.
What is a reasonable payment term?
Thirty days is common, and the Fair Payment Code’s Gold award requires most invoices to be paid within that period. Business terms over 60 days must not be grossly unfair.
Can I charge interest if a customer pays late under the extended terms?
Potentially, once the valid due date passes. Statutory interest and compensation may apply unless the contract provides an enforceable substantial alternative remedy.
What if the customer threatens to take the work elsewhere?
Assess profitability and the cost of extending credit. If the arrangement destroys your margin, renegotiation or declining future work may be safer than accepting unlimited exposure.
Protect Your Margin and Your Cash
Longer payment terms carry a financing cost, so negotiate them as part of the price. Speak to our team for a free, no-obligation discussion about managing large customer accounts, improving credit control or recovering overdue invoices.
