The Late Payments Bill fixes the terms. It doesn’t fix the customer.

A 60-day cap and statutory interest will change payment behaviour across the UK. Watch what that does to your early warnings.

The Small Business Protections (Late Payments) Bill — moving through Parliament as the Commercial Payments Bill — proposes a hard cap of 60 days on payment terms, mandatory interest on late payments at 8% above the Bank of England base rate, a 30-day window for invoice disputes, and new powers for the Small Business Commissioner to investigate and fine persistent late payers. For the businesses on the wrong end of the UK’s £11bn-a-year late-payment problem, it is overdue. Around 14,000 businesses close each year because of late payments — roughly 38 a day — and small firms spend a combined 133 million hours chasing invoices the law already says they are owed.

So the bill deserves to pass. But if you run credit for a living, it changes something subtle that nobody puts in the headline: it makes your ledger a less honest witness.

What the bill actually proposes

The bill would cap payment terms at 60 days, with limited exemptions. Interest on late payments becomes mandatory at 8% above the Bank of England base rate, applied automatically rather than left to the supplier to claim. Invoices must be disputed within 30 days. Large companies would have to report publicly on their payment practices, and the Small Business Commissioner gains the power to investigate and fine persistent late payers. A ban on retention payments in construction is under consultation. Taken together, the direction is clear: payment behaviour is becoming regulated, priced and publicly visible, where until now it has been a private commercial matter.

The early warning the bill quietly retires

For as long as trade credit has existed, the most-read risk signal in Britain has been the ledger itself. The customer who paid in 30 days and now pays in 45. The stretch to 60. The drift that told you something was wrong months before a filing or a judgment said so — the reason moves before the score does, and payment drift is usually how the reason first shows up.

Now run that signal through the bill. When lateness costs 8% over base, invites a fine and puts a customer’s name in a report, the rational customer in difficulty stops stretching you. They pay the invoices with teeth — on time, to the day — for as long as they possibly can, while the distress reroutes somewhere less enforced and less visible: intercompany balances, directors’ loans, deferred filings, the one supplier who never invokes the interest. Your ledger reads punctually right up until the failure arrives. In practice, the bill doesn’t remove the risk from your book. It removes the rehearsal.

A punctual payer is not a healthy customer

That has always been true — payment behaviour tells you how a customer prioritises you, not what they can afford. The bill widens the gap between the two. Compliance you can now largely take for granted; solvency you cannot. And the businesses most exposed are the ones whose entire early-warning system was the aged-debt report, because the aged-debt report is precisely the document the bill is designed to make boring.

The signal doesn’t disappear. It moves upstream — into the places a ledger can’t see. Filings that arrive late or thin. County court judgments from other creditors. Director resignations and structural changes. Deterioration of your customer's customers. The credit teams that come through the transition well will be the ones reading those signals directly, on live accounts, rather than waiting for a payment pattern the law has just made artificially clean.

What to do before it passes

Three moves follow from taking the bill seriously. Align your own terms with the 60-day world now, so the cap arrives as admin rather than renegotiation. Reprice what punctuality means in your risk models — an on-time payer under statutory interest is a weaker positive signal than an on-time payer was last year. And shift your early-warning weight off the ledger and onto the account: the filings, judgments, structure and behaviour of the business itself, monitored continuously rather than discovered at review.

The bill will do what it promises: make late payment rarer, costlier and more embarrassing. What it cannot do is make a struggling customer solvent — it can only make them punctual. Knowing the difference is about to become the defining skill of a credit team.

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