
Cash flow is the lifeblood of every small business, yet late payments continue to drain the energy, time, and stability of SMEs across the UK. In a move welcomed by small business leaders, the UK government has announced a major crackdown on late payments, including plans to strengthen the Prompt Payment Code and give small businesses more power to challenge slow-paying customers.
With late payment culture costing UK SMEs an estimated £23.4 billion annually, this is not just a policy headline—it’s a lifeline.
What’s Changing?
In April 2025, the government confirmed:
✅ Stricter Prompt Payment Code enforcement, reducing payment terms from 60 days to 30 days for large companies dealing with SMEs.
✅ Plans to make large companies publish payment practices in their annual reports, increasing transparency.
✅ A commitment to empower the Small Business Commissioner with greater authority to investigate and penalise persistent offenders.
✅ Potential legal changes to make prompt payment a contractual obligation.
These measures aim to rebalance the power dynamic between small suppliers and large clients, reducing the fear of losing business if SMEs challenge slow payments.
Why This Matters for Small Businesses
- Cash Flow Stability: Late payments are a leading cause of cash flow crises and business failures. Faster payments can reduce reliance on overdrafts and expensive short-term loans.
- Growth and Investment: Reliable payment timelines enable SMEs to plan, invest in staff, and scale with confidence.
- Mental Wellbeing: Chasing unpaid invoices is stressful. Clarity around payment terms reduces administrative burden and anxiety.
- Sector-wide Fairness: Sectors like construction, creative services, and manufacturing, where late payment is rife, stand to benefit the most.
What Should SMEs Do Now?
While government changes will help, SMEs should also take proactive steps:
✅ Review Payment Terms: Ensure your contracts clearly state 30-day payment terms and align with the upcoming regulations.
✅ Credit Control Systems: Use automated invoicing and reminders to manage debtors.
✅ Cash Flow Forecasting: Plan for inflows and outflows, identifying potential shortfalls early.
✅ Know Your Rights: Stay informed about Prompt Payment Code updates and the Small Business Commissioner’s support tools.
✅ Speak Up: Use the strengthened system to report persistent late payers without fear.
How Precision Can Help
At Precision Management Consulting, we help SMEs take control of their finances by building clear cash flow systems, credit control processes, and forecasting models that improve your bottom line. We can:
🔹 Help you review client payment practices and assess risk.
🔹 Build automated systems for tracking invoices and payments.
🔹 Train your team in effective debtor management without damaging client relationships.
🔹 Integrate cash flow forecasting into your monthly reviews, so you can plan for growth with confidence.
Looking Ahead
The UK’s late payment crackdown is a significant win for small businesses, but enforcement will take time. SMEs that prepare now will be best positioned to protect their cash flow, strengthen supplier-client relationships, and reduce financial stress.
Prompt payment is not a luxury—it’s a necessity for a thriving SME sector and a healthy economy. At Precision, we are committed to ensuring your business doesn’t just survive these challenges but builds resilience for the long term.
📞 Ready to protect your cash flow and plan for growth? Contact Precision Management Consulting today to build your financial strength in a changing landscape.