How UK CFOs Should Prepare for the 60-Day Payment Terms Cap

UK CFOs should prepare now: the Commercial Payments Bill would cap payment terms at 60 days, while SI 2025/1152 already forces payment-performance disclosure in directors’ reports.

Two measures are converging on the finance function. The Companies (Directors’ Report) (Payment Reporting) Regulations 2025 (SI 2025/1152) apply to financial years beginning on or after 1 January 2026. The Commercial Payments Bill, introduced to the House of Lords in May 2026, goes further by capping contractual terms, mandating interest and giving the Small Business Commissioner real enforcement power.

What does the 60-day payment terms cap actually require?

According to Macfarlanes, the Bill sets a statutory maximum of 60 days for commercial contracts, and 30 days where the purchaser is a public authority. Terms beyond those limits are void, and the Bill prescribes the trigger date from which the payment period runs. Exemptions are narrow: contracts where the purchaser is the smaller party, contracts between two large undertakings, and types specified by the Secretary of State.

Late payment would carry simple interest at 8% above the Bank of England base rate as an implied term, and any clause excluding it would be void. Macfarlanes expects the cap to take effect no earlier than 2027, which leaves one planning cycle rather than several.

Executive Action

• Map every supplier contract with terms above 60 days and quantify the working-capital release required to move them.
• Identify contracts that could rely on an exemption, and confirm the reliance would be stated expressly in writing.
• Model the cost of 8% over base interest on your current late-payment tail.

What must be disclosed in the directors’ report from 2026?

According to HSF Kramer, SI 2025/1152 requires in-scope companies to report their standard payment period in days, and any variations made during the year, including whether suppliers were notified or consulted. They must also disclose average days to pay, the percentage and value of payments made within 30 days, 31 to 60 days and 61 days or more, and the percentage and value not paid within the agreed contractual period.

Scope follows the large-company test in the Companies Act 2006: two of three thresholds of £54 million turnover, £27 million balance sheet total and 250 employees. Each qualifying subsidiary is caught, and group reports must cover in-scope subsidiaries. The data must cover the whole financial year, so the ledger logic needs to be right from day one of the period.

Executive Action

• Confirm which entities in your group meet the size test and assign a named data owner for each.
• Reconcile procure-to-pay data to the “payment notice” trigger the regulations use, not invoice date.
• Brief the audit committee before the first report is drafted, not after.

How exposed is your business to Commissioner enforcement?

The Bill would amend the 2017 payment practices reporting regime to cover statutory interest owed and paid. Macfarlanes notes that the Small Business Commissioner could make recommendations, require publication of payment practices and issue directions, with penalties of up to 1% of annual UK turnover for persistent late payment or disregard of directions. Persistently late large companies would also need to publish board or audit committee commentary on their payment performance.

The Commissioner would also run an adjudication scheme with binding interim decisions, which only the smaller business can trigger. For a CFO, that converts a commercial grievance into a regulated process with a published record.

Executive Action

• Track late-payment rate by supplier segment monthly and report it to the executive committee.
• Draft a standing audit committee paper on payment performance now, so commentary is routine rather than reactive.
• Review the capital allocation framework to reflect the working-capital cost of shorter terms.

What is the commercial case for acting early?

According to Lord Leong, speaking at the Lords Second Reading of the Commercial Payments Bill on 9 June 2026, late payment costs the UK economy an estimated £11 billion a year, and about 38 businesses close each day after running out of cash while awaiting payment. Those figures explain the political momentum, and they signal that scrutiny of large-company payment behaviour will intensify rather than ease.

The trade-off is real: shorter terms strengthen supplier resilience and reduce third-party risk, but they pull cash out of your own cycle. Finance teams that renegotiate early, and use dynamic discounting or supply chain finance selectively, preserve more leverage than those forced to comply by statute. Use our technology and capital review templates and executive assessment tools to structure the review, and see the wider executive briefings library for related finance guidance.

Executive Action

• Open supplier conversations in the next two quarters while terms are still negotiable.
• Quantify the cash-conversion impact of a 60-day ceiling and agree a funding response with the treasurer.
• Test supply chain finance arrangements against the new reporting and disclosure expectations.

Frequently asked questions

About INFORMD. INFORMD provides intelligence briefings, tools and frameworks for senior business leaders across technology, finance, strategy and compliance. Based in Milton Keynes, UK, we help executives stay informed and act with confidence. Explore our full briefing library or access our free assessment tools.

Stay ahead. Subscribe to INFORMD’s weekly executive briefing at informd.co.uk (/resources/).