Jul 17

2026

Tackling the late payment culture: practical strategies to improve your SME cash flow this summer

Late payments are estimated to cost the UK economy almost £11 billion each year and contribute to 14,000 business closures. More than 1.5 million businesses are affected annually. Among surveyed businesses that spent staff time chasing overdue invoices, the average was 86 hours a year. The Commercial Payments Bill promises stronger protection, but it is still progressing through Parliament, so SMEs must continue to manage the immediate risk themselves. Our guide to how recovery accountants improve cash flow explains the wider financial discipline.

Why summer can put cash flow under pressure

Holiday absences can slow invoice approvals and payment runs. Sole traders and partners may also face their second Self Assessment payment on account on 31 July. A seasonal slowdown combined with overdue invoices can quickly create pressure around wages, VAT, suppliers and tax. Regular management accounts and the KPIs worth watching monthly give you an earlier warning of gaps.

Practical strategies you can use now

1. Put clear terms in writing. Agree payment dates before work starts. Consider deposits, milestone billing or shorter terms for larger or higher-risk jobs.

2. Invoice promptly and accurately. Send invoices as soon as the agreed work or milestone is complete. Include the correct legal entity, purchase order, description, due date and bank details. Switching to cloud accounting can make invoicing and automated reminders easier.

3. Review debtors every week. Use an aged debtor report, contact customers before invoices become overdue and assign responsibility for follow-up. Credit-check new customers before offering substantial credit.

4. Use your existing legal rights carefully. For qualifying business-to-business debts, statutory interest is generally 8 percentage points above the Bank of England base rate. The rate applicable from 1 July to 31 December 2026 is 11.75%, based on the 3.75% Bank Rate in force on 30 June. Statutory interest cannot normally be claimed where the contract already provides a different substantial remedy for late payment.

5. Track retentions and staged payments. Construction firms should record when each retention becomes due and chase its release promptly. This supports the wider work of protecting contractor margins.

6. Maintain a rolling forecast. A 13-week cash-flow forecast should include realistic collection dates, payroll, VAT, loan payments and tax. Stress-test it for one or more major customers paying late.

The fixed sum can be claimed once for each qualifying late payment. Where reasonable recovery costs exceed that amount, the supplier may also be entitled to claim the remaining reasonable costs.

The reforms moving through Parliament

The Commercial Payments Bill was at Committee stage in the House of Lords in July 2026. The proposals include maximum payment terms of 60 days with limited exemptions, mandatory statutory interest, a ban on withholding construction retentions and stronger enforcement powers for the Small Business Commissioner. The government has said businesses will receive a lead-in and transition period, so the measures are not yet in force. Further detail is available in the government’s crackdown.

Businesses can already seek guidance from the Small Business Commissioner and check whether customers participate in the Fair Payment Code. Where delayed payment is linked to questioned transactions, financial records or misconduct, forensic accounting support may be appropriate.

If you trade across the border

Late payment also affects overseas markets. A 2025 Irish SME survey reported that, among firms affected by delayed payments, 62% lacked sufficient liquidity for daily operations and 42% lacked the cash flow needed to grow. A joined-up cross-border accounting and tax approach helps businesses coordinate collections, VAT, payroll and supplier commitments. If a customer becomes insolvent, understanding what happens to creditors in an insolvency is essential.

Get your collections under control

You do not need to wait for legislation to improve payment performance. SCC’s recovery and restructuring and SME business solutions teams can review debtor processes, forecasting and working-capital pressure. Speak to SCC Chartered Accountants about a practical cash-flow review.