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Late payments cost the UK economy £11 billion every year and close 38 businesses every single day. Those numbers have been cited for years. What has changed in 2026 is that the government has finally decided to do something serious about them.
On 24 March 2026, the UK Government published its response to the "Time to Pay Up" consultation, confirming its intention to introduce what it described as "the most significant legislation to tackle late payments in over 25 years, giving the United Kingdom the strongest legal framework on late payments in the G7."
The Commercial Payments Bill had its first reading in the House of Lords on 19 May 2026. It is now moving through Parliament.
This is not a consultation. It is not guidance. It is legislation, and it will affect how finance teams process invoices, manage payment runs, and report on supplier payments. The question is not whether to prepare. It is how quickly.
The Bill contains four measures that will directly affect how finance teams operate. Each one has practical implications for AP workflows.
The most widely discussed provision is a statutory cap of 60 days on business-to-business payment terms, with an expectation that this will taper down to 45 days over time.
Currently, large businesses commonly impose 90-day or even 120-day payment terms on smaller suppliers, using their commercial leverage to extend their own working capital at the expense of the supply chain. The cap makes terms beyond 60 days legally unenforceable in most circumstances.
Some exemptions will apply, including where both parties are large companies and where international trade is involved. But for most mid-market businesses dealing with SME suppliers, 60 days is the new maximum.
According to Bird & Bird, businesses will need to "identify contractual terms which may be in breach, such as those where payment periods exceed 60 days." That review needs to happen before the legislation comes into force, not after.
Previously, the Office of the Small Business Commissioner could identify poor payment practices and highlight them publicly. That created reputational risk. It did not create financial risk.
The Bill changes that significantly. The SBC now has enforcement powers including the ability to:
The penalty threshold is a reporting rate of 25% or more of suppliers paid late, which triggers an investigation. The penalty scale is based on twice the statutory interest owed in the last reporting period.
For finance teams, this changes the risk calculus entirely. Late payment is no longer just bad practice that might generate a news story. It is a compliance issue that can result in a fine.
This is the provision that most directly affects AP workflows, and the one that will create the most operational pressure for teams still running manual processes.
Under the updated rules, finance teams will have 30 days to verify or dispute an incoming invoice. If no action is taken within that period, the invoice is automatically deemed approved and must be paid within the agreed payment term.
Read that again: if your AP team does not act on an invoice within 30 days, it is legally approved by default.
For businesses where invoice approval currently takes 12 to 18 days on average, this window may seem manageable. But that average hides significant variation. Invoices that arrive during a busy period, that require sign-off from a manager who is travelling, or that sit in an email inbox waiting for a response can easily exceed 30 days under a manual process.
The 30-day rule also eliminates one of the most common tactics for managing cash flow at the expense of suppliers: using slow approval as an informal mechanism to delay payment. That is now a compliance risk.
Large businesses are already required to report their payment performance twice a year under the Payment Practices and Performance Reporting Regulations. The Commercial Payments Bill strengthens this requirement in two ways.
First, the data submitted under this regime will be actively reviewed by the SBC to identify patterns of late payment that warrant investigation. Second, boards and audit committees will be legally responsible for reviewing and approving supplier payment reports before submission.
As Mayer Brown notes, this "marks a clear shift from guidance to enforcement" and means that payment compliance is no longer a finance operations matter alone. It is a governance matter that reaches board level.
The Late Payment of Commercial Debts (Interest) Act 1998 established the right of businesses to claim interest on late payments. In practice, most suppliers were reluctant to invoke it for fear of damaging the customer relationship. The deterrent effect was limited.
The Commercial Payments Bill changes the enforcement mechanism. Penalties are imposed by the regulator, not claimed by the supplier. A supplier does not need to take legal action against a customer to trigger a consequence for late payment. The SBC investigates, and the penalty follows.
This is a structurally different regime. It does not rely on the aggrieved party being willing to escalate. It relies on the regulator monitoring the data that large businesses are already required to submit and acting on what it finds.
The 30-day auto-approval provision is the measure most likely to change day-to-day AP operations for the finance teams that are currently most exposed.
As 4GL Concepts explains, "slow internal sign-off can no longer be used to delay supplier payment." If the invoice has not been disputed within 30 days, it is approved. The finance team's ability to hold payment pending further review evaporates at that point.
For teams where invoices currently wait in approval queues for weeks, where exceptions pile up at month-end, or where disputed invoices sit unresolved in someone's email inbox, the 30-day window is an operational forcing function. The process has to be faster. And it has to be documented.
The requirement for boards and audit committees to approve supplier payment reports before submission means that finance directors and CFOs can no longer treat payment compliance as an operational detail. It is a governance obligation, and the reporting data that underpins it needs to be accurate and auditable.
A finance function that cannot produce reliable, timely data on its supplier payment performance is a finance function that exposes its executives to personal accountability under the new regime.
The first practical step is an audit of current supplier contracts to identify any payment terms that exceed 60 days. These contracts will need to be renegotiated or amended before the legislation takes effect. The earlier this review begins, the more orderly the process.
Travers Smith recommends that businesses identify contracts where payment periods exceed 60 days and consider the legal position carefully, noting that the legislation "will impact businesses of all sizes."
An invoice approval workflow that currently takes an average of 12 to 18 days to complete leaves little margin for error under the new rules. Invoices that encounter an exception, a missing approver, or a query from the AP team can easily exceed 30 days under manual processes.
The structural fix is to move from a process that depends on individuals remembering to act to one that automatically tracks every invoice from receipt, enforces response deadlines, escalates when approvals stall, and records the full timeline. That is not a procedural change. It is a systems change.
Businesses that have automated their AP approval workflows already operate within this window comfortably. Businesses that have not face the risk of invoices being auto-approved before the team has had a chance to review them properly.
The reporting obligations under the Commercial Payments Bill require accurate, reliable data on when invoices were received, when they were approved, and when they were paid. Producing that data from a manual AP process, or from email chains and spreadsheets, is neither easy nor reliable.
Kefron notes that "executives will demand accurate real-time payment data to avoid signing off false reports." The word "false" matters here. Signing off inaccurate payment performance data under a regime with SBC enforcement powers creates personal liability for the signatories.
An AP automation platform that records the timestamp of every action on every invoice, from receipt through verification through approval through payment, produces the audit trail that this reporting obligation requires as a by-product of normal operations. There is no separate compliance process. The data is there because the system always captures it.
The Commercial Payments Bill does not require businesses to implement AP automation. It requires them to pay on time, verify invoices within 30 days, and produce accurate payment data for reporting. Manual processes can theoretically meet these requirements.
In practice, the bill has created a situation where the operational risk of manual AP processes is no longer just internal. It is regulatory.
A finance team processing invoices through email approvals and spreadsheet tracking faces three specific compliance risks under the new regime:
The 30-day window risk. Invoices sitting in approval queues without systematic tracking can pass the 30-day threshold silently. The team does not know the clock has expired. The invoice is legally approved. The payment is now legally due.
The reporting accuracy risk. Payment performance data produced from manual processes is only as accurate as the manual data entry that underpins it. Board-level sign-off on inaccurate data creates governance exposure.
The penalty threshold risk. A finance team that cannot identify in real time which suppliers are approaching or exceeding agreed payment terms cannot manage its way below the 25% late payment threshold that triggers SBC investigation.
Dost's AP automation platform addresses all three. The approval workflow tracks every invoice from receipt with a timestamped record, enforces response deadlines, and escalates automatically when the window is at risk. The data extraction and processing workflow produces a complete audit trail as a matter of course. And the real-time visibility into payment status gives the finance team and the board the data they need to manage compliance actively, not reactively.
The Bill had its first reading in the House of Lords on 19 May 2026. As of the time of writing, it is moving through Parliament and a commencement date has not yet been confirmed. The Government has committed to legislating "as soon as Parliamentary time allows." Given the political priority placed on this reform and the extensive consultation already completed, the expectation among legal advisors is that the legislation will come into force within 12 to 18 months. Businesses should be preparing now rather than waiting for a confirmed date.
The 60-day cap applies to B2B payment terms broadly, but some exemptions are expected. Current proposals include exemptions where both parties to a contract are large companies and where international trade is involved. The specific exemption criteria will be confirmed in the final legislation. However, legal advisors including Bird & Bird and Travers Smith recommend reviewing all contracts with payment terms exceeding 60 days now, regardless of the final exemption scope, as the direction of the legislation is clear even if the precise boundaries are not yet settled.
Under the new enforcement regime, payment performance data submitted under the existing Payment Practices and Performance Reporting Regulations will be monitored by the Small Business Commissioner. A business reporting that 25% or more of its suppliers were paid late triggers the possibility of an SBC investigation. The investigation considers mitigating circumstances, past performance, and evidence of future change. If it results in a finding of persistent late payment, the financial penalty is calculated as twice the statutory interest that would have been owed on the late payments during the most recent reporting period.
The Commercial Payments Bill is the most significant change to the late payment landscape in Britain since 1998. It shifts the enforcement mechanism from supplier action to regulatory oversight, introduces financial penalties for persistent late payers, and creates a 30-day invoice verification window that makes slow AP approval a legal risk rather than an operational inconvenience.
The finance teams most exposed to the new regime are those running manual AP processes: email-based approvals with no systematic tracking, spreadsheet-based payment records, and no real-time visibility into which invoices are approaching payment deadlines.
The legislation has not yet come into force. But the direction of travel is confirmed and the legislative process is underway. Businesses that begin preparing now, by reviewing their supplier contracts, redesigning their approval workflows, and building the audit trail that compliance requires, will find the transition manageable. Those that wait for a commencement date before acting will have significantly less time to do the same work.
