How to protect your cash flow as SME late payments hit a new high this June
If your invoices are taking longer to clear this summer, you are not imagining it. Figures published in June 2026 show nearly half of SME invoices are overdue, with small firms waiting an average of 27 days after issuing an invoice before the money arrives. Cash flow, not profit, is what keeps the lights on.
The firms that cope best are the ones with clear terms, clean paperwork and steady credit control, which is exactly where a good outsourced finance department earns its keep.
The wait to be paid has crept up across the board. The latest Sage SME Pulse analysis, based on anonymised data from around 150,000 businesses, found that SMEs took an average of 37.1 days to pay supplier invoices in Q1 2026, up from 31.9 days in the same period of 2025. When everyone pays a little later, the delay ripples down the chain. You end up funding other people’s working capital while waiting for your own. For the wider pressures squeezing smaller firms, our note on overcoming common SME growth barriers is worth a read.
| Late payment snapshot, June 2026 | Figure |
|---|---|
| Share of SME invoices overdue | 49% |
| Average wait after issuing an invoice | 27 days |
| Average time SMEs take to pay suppliers | 37.1 days, up from 31.9 days |
| Estimated annual cost to the UK economy | Almost £11 billion |
| UK businesses closing each year due to late payment | Around 14,000, or 38 a day |
Why this June feels tighter
Rising costs have not helped. Wage bills, employer National Insurance and general inflation have all nibbled at margins, a theme we cover in how inflation is feeding into small business costs. When the money coming in slows and the money going out climbs, the gap has to be filled somehow, usually with an overdraft, credit card, invoice finance or the director’s own savings. None of those is a long-term plan.
The government’s own consultation response says late payments cost the UK economy almost £11 billion a year, with 14,000 businesses closing each year as a result. That is why credit control should be treated as a core finance task, not an awkward admin job.
Practical steps to protect your cash
Start with the basics, because they work. Agree payment terms in writing before you take on work, and put the due date on the invoice in plain figures. Send invoices as soon as the job, milestone or billing period is complete, not at month end unless the contract requires it. Chase early and politely, then firmly. Good bookkeeping sits underneath all of this, and our guide on why accurate bookkeeping matters explains why sloppy records cost you twice.
Need Expert Accounting Advice?
If you are unsure about tax, bookkeeping, payroll, property accounts or business finances, speak to the team at FHP Accounting for clear, practical guidance.
You can also charge for the delay. For qualifying business-to-business debts, you can usually claim statutory interest at 8% above the Bank of England base rate, plus fixed compensation and reasonable recovery costs. Many small firms never claim it, usually to protect a relationship. That is understandable, but a clear late payment policy often changes behaviour before you need to add charges, as we discuss in handling arrears and disputes.
Visibility matters too. If you cannot see which invoices are overdue at a glance, you cannot act. We walk through this in management accounts directors actually use and in our landlord cash flow guide for property owners. For newer businesses building these habits, our accountants for start-ups can set the systems up from day one.
A quick example. A Nottingham joinery firm with around £40,000 sitting in unpaid invoices does not always need a complicated fix. Tightening terms to 14 days, sending statements weekly and making one named person responsible for chasing can halve the waiting time within a quarter. Nothing clever, just consistency.
Landlords face the same discipline with rent, which is why our landlord accounting services are built around cash flow tracking. Similar thinking runs through property management accounting for residential blocks, where service charge timing can make or break a budget.
The reforms on the horizon
Change is coming, but it is not here yet. The government has announced the toughest late payment crackdown in over 25 years, including a proposed 60-day cap on payment terms, mandatory statutory interest and stronger powers for the Small Business Commissioner. The Commercial Payments Bill is progressing through Parliament, but the rules are not yet fully in force. So responsibility for your cash flow stays with you for now. Our look at protecting SME margins this summer covers the cost side of the same coin.
Frequently asked questions
What can I do about late payments as a small business?
Set clear written terms, invoice promptly, chase consistently and apply statutory interest where it fits. Good records make all 3 easier.
Can I charge interest on late payments in the UK?
Yes. For qualifying business-to-business debts, you can usually claim 8% above the Bank of England base rate, plus compensation and recovery costs.
Will the new late payment law fix this?
It should help, but it is not in force yet. A 60-day cap and mandatory interest are proposed, so tight credit control still matters now.
How do I improve cash flow quickly?
Shorten payment terms where possible, send invoices sooner, chase weekly and keep a live view of who owes what.
Talk to us before the next quarter
Late payment is a habit as much as a policy, and habits respond to structure. If your cash flow feels tighter than it should this year, speak to our Nottingham accountants and we will help you tighten terms, sharpen credit control and keep more of what you have already earned.
I lead FHP Accounting, an accountancy practice specialising in Commercial and Residential Property Accounting. Our goal is to make the administration of running property portfolios easier for landlords, managers, and investors — allowing you to focus on what you do best, while we take care of everything behind the scenes.
Need Expert Accounting Advice?
If you are unsure about tax, bookkeeping, payroll, property accounts or business finances, speak to the team at FHP Accounting for clear, practical guidance.
