When the King's Speech promised new late payment legislation in May, the question for most small businesses was whether the detail would survive Parliament. Four months on, the answer is taking shape. The Commercial Payments Bill [HL] cleared its Lords committee stage with 30 government amendments agreed, and a House of Lords Library briefing updated this week sets out what is still in play before report stage. For UK SMEs, accountants and the software vendors who serve them, this is the moment to plan rather than wait.

What has changed since the King's Speech

The core architecture is intact. The bill sets a 60-day ceiling on payment terms for business-to-business contracts and 30 days where a public authority is paying, mandates statutory interest on late invoices, bans cash retentions in construction contracts and gives the Small Business Commissioner (SBC) teeth. What committee stage added is mostly plumbing, but it is plumbing that matters:

  • Public sector alignment: amendments to the Procurement Act 2023 mean implied payment terms for public authorities and public construction contracts should not exceed 30 days.
  • Enforceable SBC decisions: changes clarify which investigation costs the Commissioner can recover and make adjudication decisions enforceable consistently across England and Wales, Scotland and Northern Ireland.
  • Consultation before fines: the government must consult the SBC and others before setting the financial penalties the Commissioner can impose.
  • Exemptions under scrutiny: the Lords Delegated Powers Committee called the powers to exempt contracts from maximum payment terms "inappropriately wide", and the government has since published a memorandum defending them.

The fights still to come at report stage

Several issues were debated at committee and are likely to return. The Liberal Democrats have tabled an amendment to shorten the 60-day maximum to 45 days within five years of the bill coming into force, and opposition peers are pressing for a funding plan before the SBC's new adjudication and investigation powers start. Other live questions include how the rules apply to nationalised bodies, whether small suppliers can invoice in stages rather than only at the end of a contract, and how statutory interest works around bank holidays.

None of these change the direction of travel. According to figures cited in the Lords Library briefing, 44% of SME invoices are paid late, late payment costs the UK economy around £11bn a year, and roughly 14,000 businesses close annually as a result. The bill is not expected to come into force before 2027 at the earliest, which gives businesses a planning window, not a reason to defer.

Cash flow is the real prize, not statutory interest

Statutory interest at 8% above base rate sounds like a strong deterrent, but it only helps the supplier who invoices it, and many small firms will not risk a customer relationship to do so. A 60-day ceiling also still means two months of working capital sitting on someone else's balance sheet. The businesses that feel the benefit first will be those that reduce how much revenue ever becomes a receivable.

That is where payment method choice becomes a finance decision. A card payment taken by phone through a Virtual Terminal, or a Pay by Link request attached to an invoice email, can settle into your account the next working day. For smaller B2B orders, repeat trade customers and deposits, offering card as the default rather than the exception turns a 30-to-60-day debt into next-day settlement at a known, itemised cost. Accountants advising clients on the bill should model that trade-off explicitly: card processing fees against the real cost of carrying debtors, overdraft interest and time spent chasing.

What to do before the bill lands

There are three practical steps worth taking this quarter. First, audit your contracts and standard terms: anything above 60 days (or above 30 for public sector work) will be out of line with the new regime, and it is easier to reset terms at renewal than under pressure later. Second, look at your aged debtor report by customer and flag which balances could reasonably move to card or Pay by Link, typically smaller or repeat orders. Third, make sure payments reconcile automatically; if card receipts flow into Xero with gross, fees and net split correctly, your debtor position is accurate and credit control can focus on the invoices that genuinely need chasing.

Monek is an FCA-authorised payment institution (FRN 920628) offering a UK payment gateway with card processing from 0.99% blended, IC++ pricing for larger volumes, next-day settlement, Virtual Terminal and Pay by Link as standard, and a native Xero payment integration. If you want to understand what moving part of your invoicing onto card would cost against what it would release in cash, our team will run a no-obligation rate comparison and talk it through with you or your accountant.