The 60-Day Cap Won't Fix Late Payment on Its Own

The proposed 60-day limit would end the longest payment terms. Whether suppliers are paid on time depends on what happens after an invoice arrives.

The Commercial Payments Bill is moving through Parliament. At the time of writing, it has completed Report stage in the House of Lords, with third reading scheduled for 20 October 2026. If passed, the Bill would introduce a 60-day maximum payment term for commercial contracts within its scope, with limited exemptions. It would also make interest on late payments mandatory, strengthen the powers of the Small Business Commissioner and increase reporting expectations for large businesses.

That is an important shift. It sets the legal boundary for payment terms, and paying suppliers on time within that boundary remains the job of the finance operation.

Payment terms and payment performance are separate measures

Payment terms answer one question: when should an invoice be paid? Payment performance answers another: was it actually paid by then?

A business can agree 30-day terms and still pay on day 50. It can agree 60-day terms and pay on day 61. The proposed cap changes the first number. The second number is where supplier relationships, cash flow and finance-team credibility are decided.

Under the current rules, businesses can agree payment terms beyond 60 days in some private-sector contracts, provided the extension is agreed and not grossly unfair to the supplier. The proposed Bill would narrow that flexibility, as the Small Business Commissioner's guidance explains. The reasons invoices are paid late sit elsewhere, in the process between receipt and payment.

That distinction matters because late payment remains a substantial problem. The UK Government estimates that late payment costs the economy almost £11 billion a year, as cited by the Small Business Commissioner.

Helen Hanson, Founder at HEL's brand experience and live events agency, frequently resorts to using the company overdraft to cover shortfalls, incurring additional banking charges, while they wait in some cases for as long as 150 days for clients to settle their outstanding invoices. She explains; 'It's non-negotiable to us to pay our staff on time but the fortnightly payroll is at odds with late paying clients who we are effectively bankrolling while we wait for them to pay us. I welcome this legislation as a voluntary scheme is not enough to establish a level and fair playing field.'

Good Business Pays' Spring 2026 Late & Slow Payment Watchlist, based on companies' own statutory payment reports, found that businesses on its watchlist paid more than £8.75 billion of invoices late between June and December 2025. More than £5 billion of that total related to invoices where no dispute was reported. In the same period, 122 companies reported paying at least 70% of their invoices late.

The figures show outcomes, and the reasons behind individual delays will vary. The undisputed share points to where much of the problem sits: in the handling of invoices nobody has challenged.

Anyone working in accounts payable will recognise the more familiar causes. An invoice arrives without a purchase order. It cannot be matched. It is sent to the wrong approver, or an approver is unavailable. A query is raised too late, ownership is unclear, or an approved invoice misses the next payment run.

Each of those failures sits in the finance process, downstream of the contract.

Why the Bill goes beyond the cap

The wider package of reforms recognises that payment terms are only part of the issue. Alongside the 60-day maximum, the Bill would:

• Require interest on late payments at 8% above the Bank of England base rate.

• Give suppliers a right to a fixed sum where a purchaser raises a dispute late or without sufficient information.

• Give the Small Business Commissioner stronger powers to investigate persistent poor payment practices, adjudicate disputes and take enforcement action.

• Introduce further reporting requirements for large businesses, including greater board or audit-committee scrutiny where payment performance is persistently poor.

Together, these measures address three different issues:

• Terms: what the contract allows.

• Payment performance: whether invoices are paid by the agreed date.

• Operational control: whether finance can see, manage and resolve issues before an invoice becomes overdue.

The 60-day cap is strongest on the first. Sustainable improvement depends on all three.

60 days is the outer limit

The Fair Payment Code provides a useful perspective on what good payment behaviour looks like in practice.

Its Gold Award requires at least 95% of all invoices to be paid within 30 days. Silver requires at least 95% of all invoices to be paid within 60 days, including at least 95% of invoices to small businesses within 30 days. Bronze requires at least 95% of all invoices to be paid within 60 days.

The two higher tiers set expectations well inside the legal maximum. Finance leaders should be cautious about allowing a 60-day ceiling to become an automatic 60-day commercial policy, particularly where shorter terms are practical and have been agreed with suppliers.

Business views show why implementation will matter

The government's consultation results show why the impact will vary.

Seventy-three per cent of micro businesses and 70% of small businesses agreed that a 60-day maximum would be effective in addressing long payment times. Among large businesses, just 44% agreed, while 47% disagreed.

The cap remains necessary, and the split shows that its practical implications will differ by organisation. Some will need to revisit supplier contracts, forecast the working-capital effect of paying sooner and adjust how they manage payment runs. Others already operate comfortably within 60 days and still need better data and controls to demonstrate that performance consistently.

The operational work starts now

For finance leaders, the immediate question is whether the business can reliably pay on time once terms are tighter. Answering it means working through practical questions such as:

• Which supplier contracts currently sit beyond the proposed limit?

• What proportion of invoices are paid within agreed terms? Average time to pay hides the long tail of late invoices.

• Where do invoices most often stall: receipt, matching, approval, dispute resolution or payment run?

• Are genuine disputes identified quickly, assigned to an owner and resolved within a clear timeframe?

• What would faster payment mean for working capital and cash forecasting?

• Can the business produce reliable payment-performance data for management, the board and external reporting?

KPMG's analysis of the reforms points in the same direction, recommending that affected organisations assess the potential cash-flow impact, identify mitigations and consider incremental funding requirements ahead of implementation.

The aim is to know, invoice by invoice, what is due, what is blocked, who owns the next action and when cash will leave the business.

A connected AP and supplier-payment process gives finance teams that visibility: routing invoices to the right people, surfacing exceptions early, scheduling payments deliberately and maintaining a clear audit trail. That creates more control over cash while giving suppliers the certainty they need.

The 60-day cap would reset the legal boundary. The bigger opportunity is to reset the operating standard: make payments predictable, resolve problems early and ensure suppliers are paid as agreed.

Frequently Asked Questions

Will the UK's 60-day payment cap fix late payment?

The cap sets a legal maximum on payment terms. The operational causes of late payment, such as invoice matching, approval bottlenecks, disputes and payment-process visibility, sit outside it. Consultation data shows large businesses are split on its effectiveness, with 44% agreeing and 47% disagreeing it will address long payment times.

Is 60 days a target or a maximum under the new UK payment rules?

60 days is a legal maximum. The Small Business Commissioner's Fair Payment Code sets more demanding voluntary standards, requiring 95% of invoices paid within 30 days for a Gold Award, or 60 days for Silver and Bronze.

What should finance teams do to prepare for the Commercial Payments Bill?

KPMG recommends assessing the potential cash-flow impact, identifying mitigations, and considering incremental funding requirements. Finance teams should also review invoice validation speed, approval bottlenecks, dispute handling, and their ability to produce reliable payment-performance data.

Sofia Milford

Product Marketing & Brand Director, Corpay UK

Sofia Milford is Product Marketing & Brand Director at Corpay UK. With over a decade of experience in SaaS and FinTech, she leads product marketing and brand strategy, turning customer insight into propositions and GTM programmes that support growth.

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