UK CFOs Face a New 60-Day Payment Cap — Are You Ready?
A statutory 60-day payment cap, mandatory late interest and Small Business Commissioner fining powers are coming under the UK’s Small Business Protections Bill.
According to the Department for Business and Trade, late payments cost the UK economy £11 billion a year and force the closure of 38 businesses every day — more than 1,000 firms a month. For CFOs, payment terms have moved from a working-capital lever to a statutory compliance obligation with personal and board-level accountability attached.
The Bill follows the government’s March 2026 response to its “Late Payment Consultation: Time to Pay Up,” which ran from July to October 2025 and drew more than 850 responses from business groups, lenders and trade bodies. Ministers have billed it as the toughest payment regime in the G7, replacing a 27-year-old framework — the Late Payment of Commercial Debt Act 1998 — that relied on suppliers chasing debtors through the courts rather than a regulator with fining powers. For finance functions that have spent years managing payment terms as a private negotiation with procurement, that shift from contract law to statutory enforcement changes who in the business owns the risk.
What Is Changing Under the UK’s New Payment Rules?
The Small Business Protections Bill (formally the Commercial Payments Bill) was introduced to the House of Lords on 19 May 2026, building on the Late Payment of Commercial Debt Act 1998. It introduces a statutory 60-day cap on payment terms for large firms paying smaller suppliers, falling to 45 days after a transition period. Some exemptions apply, including where both parties are large companies or the contract involves international trade. Late payments will attract mandatory interest at 8% above the Bank of England base rate, and businesses will no longer be permitted to withhold retention payments under construction contracts — a practice that has tied up supplier cash on infrastructure and property projects for decades. The Federation of Small Businesses, which worked with ministers on the drafting, has described the audit committee reporting duty in particular as a turning point in how payment culture is governed, not just measured.
Executive Action:
- Map every supplier contract against the 60-day cap and flag applicable exemptions
- Model the cash-flow impact of mandatory 8%-above-base interest on current late-payer balances
- Review construction and infrastructure contracts for retention-payment clauses that must be unwound
How Should CFOs Reset Payment Terms Before Enforcement?
Treat this as a finance-systems project, not a legal filing exercise. Segment the supplier base by payment history, renegotiate terms that exceed the statutory cap before the Bill receives Royal Assent, and rebuild accounts-payable workflows so exceptions are visible rather than buried in manual overrides. According to the Office of the Small Business Commissioner, it recovered more money for small firms in the past year than in the previous four years combined — evidence that enforcement activity, not just legislation, is already accelerating. INFORMD’s free executive assessment tools (/tools-assessments/) include a project review checklist CFOs can adapt to benchmark payment-system readiness against the new cap.
The transition period before the cap tightens from 60 to 45 days gives CFOs a runway, but it is shorter than it looks once ERP change control, supplier renegotiation cycles and treasury forecasting are all sequenced. Finance teams that model the interest liability on their current late-payer book now — rather than waiting for enforcement guidance — will have a far stronger negotiating position with both suppliers and the board than those that treat this as a compliance deadline to react to later.
Executive Action:
- Segment suppliers by contract value and current payment terms to prioritise renegotiation
- Rebuild accounts-payable exception reporting so late payments are visible weekly, not quarterly
- Set an internal payment-term ceiling now, ahead of the statutory deadline, to avoid a disruptive last-minute reset
What Does the Audit Committee Reporting Duty Mean for Finance Leaders?
The Bill requires boards or audit committees of persistently late-paying large companies to publish clear explanations of poor payment performance and the steps they are taking to improve it. That places payment practice alongside internal controls attestation as a standing audit committee agenda item — INFORMD’s guide to Provision 29 controls reporting sets out the wider pattern of disclosures boards are now expected to own. CFOs should expect payment-performance data to sit in the same board pack as covenant and liquidity reporting, not in a separate procurement update.
Executive Action:
- Add payment-performance metrics to the audit committee’s standing reporting pack
- Prepare a board-ready narrative explaining any historical late-payment patterns before disclosure becomes mandatory
- Align payment reporting with existing internal controls attestation to avoid duplicated governance processes
How Should CFOs Avoid the New Small Business Commissioner Fines?
The Small Business Commissioner is gaining powers to investigate poor payment practices, adjudicate disputes and fine persistent late payers, with penalties ministers have described as worth tens of millions of pounds for the worst offenders. Unlike the voluntary Fair Payment Code — which rewards prompt payers with Gold, Silver and Bronze status — the new regime carries statutory teeth. CFOs should treat Commissioner engagement as they would an FCA or ICO investigation: document remediation early, and don’t wait for a formal complaint to fix systemic payment-term breaches. That means finance functions need an evidence trail — payment-run logs, exception approvals, supplier correspondence — that can demonstrate good-faith compliance if the Commissioner opens an inquiry, rather than reconstructing it after the fact.
Executive Action:
- Run an internal audit of payment-term compliance now, before the Commissioner’s expanded powers take effect
- Assign clear ownership for Commissioner correspondence and disputes within the finance function
- Use INFORMD’s capital approval assessment template to pressure-test whether procurement and finance systems can enforce the new terms automatically
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The Small Business Protections Bill introduces a statutory 60-day limit on payment terms that large companies can impose on smaller suppliers, falling to 45 days after a transition period. Exemptions apply where both parties are large firms or the contract involves international trade. Late payments also attract mandatory interest at 8% above the Bank of England base rate.
The Bill was introduced to the House of Lords on 19 May 2026, following the government’s March 2026 response to its late payment consultation. It has not yet received Royal Assent, but CFOs should treat the 60-day cap and Small Business Commissioner’s expanded fining powers as imminent rather than distant.
Under the reforms, the Small Business Commissioner can investigate poor payment practices, adjudicate supplier disputes and fine persistently late-paying companies, with penalties ministers say could reach tens of millions of pounds for the worst offenders — a significant escalation from the Commissioner’s previous, largely advisory role.
Boards or audit committees of large companies with a history of late payment must publish clear explanations of their performance and the corrective steps being taken, placing payment practice alongside internal controls and covenant reporting as a standing governance disclosure.
