Late payments crackdown: What it means for advisers and their clients

The UK government is taking a tougher stance on late payments, with the Department for Business and Trade proposing new legislation that could see large companies fined millions for persistently paying suppliers late.

Under the reforms:

The Small Business Commissioner will gain powers to investigate and issue fines
A maximum 60-day payment term will be introduced for large businesses
Suppliers can charge statutory interest at 8% above the Bank of England base rate
Repeat offenders must publicly disclose their payment practices

While this is a significant step forward, the reality for advisers is clear: late payments will remain a key driver of financial stress.

A system-wide risk – Not just a small business issue
Late payment is often framed as a large business vs small supplier problem.

In practice, it affects:

Businesses of all sizes
Entire supply chains
Every sector of the economy

When payments are delayed, the impact is immediate:

Working capital is restricted
Cashflow becomes unpredictable
Businesses rely more heavily on external funding

This creates a domino effect, where one delay triggers another – quietly spreading financial pressure across the market.

The link between late payments and distress
Late payments are rarely an isolated issue. They often sit alongside:

Margin erosion from rising costs
Debtor build-up and slower cash conversion
Increased borrowing to plug cash gaps
Supplier pressure as terms tighten

Over time, this combination can push otherwise viable businesses into distress. Importantly, this is not limited to struggling sectors like construction or retail. We are seeing similar patterns across professional services, manufacturing, and specialist industries.

Early warning signs for advisers
As a trusted adviser, you are often the first to spot problems. Key indicators include:

Rising debtor days and ageing receivables
Regular cashflow pressure despite reported profits
Clients delaying supplier payments
Increased use of overdrafts or short-term finance
Suppliers tightening credit terms

These are often early-stage symptoms, but if ignored, they can escalate quickly.

Practical steps to protect clients
Encourage clients to take a proactive approach:

Strengthen credit control and actively chase overdue debts
Monitor debtor ageing and challenge slow payers early
Enforce contractual payment terms where possible
Diversify customer exposure to reduce concentration risk
Regularly forecast and stress-test cashflow

Where pressure is building, early advice is critical. Waiting typically limits options and reduces outcomes.

Final thought
The proposed reforms mark a positive shift in tackling poor payment practices. However, legislation alone won’t solve the underlying issue.

Late payments remain one of the clearest early warning signs of financial distress – and a key factor in many insolvencies.

For advisers, the priority is clear:

👉 Identify the signs early

👉 Challenge complacency around cashflow

👉 Support clients before pressure becomes unmanageable

Because when working capital starts to erode, the impact is rarely sudden – but it is often decisive.

Don’t miss Laurence’ session at 10.20am, 14 May at the Masterclass Stage: ‘How to spot the early warning signs of business distress – before it’s too late‘

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