The late payment bill is coming — do you actually know your debtor days?

Here's a small exercise. Pull up your sales ledger — or just picture it — and answer three questions. Who are your five slowest-paying customers? What's the average number of days between you sending an invoice and the money actually landing? And if your worst payer started paying on time tomorrow, how much cash would that free up in a typical month?

If you can answer all three without checking, you're ahead of most businesses I talk to. If you can't, this week's news matters more to you than you think.

On 9 June, the Late Payment Bill — formally the Commercial Payments Bill — had its second reading in the House of Lords. The government is calling it the largest crackdown on late payments in over 25 years, and for once the headline isn't overselling it.

Here's what the Bill does. It caps payment terms at 60 days on large firms paying smaller suppliers. It makes statutory interest mandatory on overdue invoices — that's the interest the law says you're entitled to charge when a customer pays late — at the Bank of England base rate plus 8%. And it gives the Small Business Commissioner the power to fine persistent late-payers up to 1% of their turnover.

The government says late payments cost the UK economy around £11bn a year. If you run a business turning over £5m and you're owed, say, £400k at any given time with an average debtor-days figure north of 70, this legislation is directly aimed at your problem.

The Bill is good news for smaller suppliers. In theory. In practice, it creates an immediate and very specific problem: you can't enforce rights you can't measure.

Statutory interest kicks in after the contractual payment date. If your invoicing is messy — terms not stated clearly, dates not tracked, no systematic record of when payment was actually due versus when it arrived — you won't be able to demonstrate that a payment was late, let alone claim interest on it.

I've worked with businesses that had £2m in receivables and couldn't produce a reliable ageing report. Not because they were badly run — they just hadn't needed one that was precise to the day. The month-end number was close enough. The FD knew roughly who was slow. Nobody had built the plumbing to track it properly because, until now, there was no mechanism to do anything about it.

That changes when this Bill becomes law. The businesses that benefit will be the ones that can point to a clean, dated record and say: this invoice was issued on this date, payment was due on this date, it arrived on this date, and here's the interest owed.

This is where it gets practical. Most accounting systems — Xero, Sage, QuickBooks — can technically produce an aged-debtor report. But "technically" is doing a lot of heavy lifting in that sentence.

The reports are only as good as the data going in. If your team raises invoices late, or doesn't record the contractual payment terms per customer, or manually adjusts dates when chasing, the ageing report is fiction. I've seen businesses where the "30 days" column was really "30 days from when someone got around to entering it," which could be a week after the work was done.

The fix isn't a new system. It's a cleanup exercise and a process change. Specifically: go through your top 20 customers by revenue, confirm the contractual payment terms for each one, make sure those terms are recorded correctly in your accounting system, and then run a proper ageing report.

If the answer is no, that's the gap to close before this legislation is useful to you.

I should be honest about the limits. The Bill is aimed at larger businesses paying smaller suppliers. If your slow payers are themselves small businesses struggling with cash, the fining mechanism probably won't apply to them and the power dynamic doesn't change much.

It also won't help if your contracts already specify 90-day terms and your customer is technically paying "on time" within those terms. The 60-day cap will override that, but the transition won't be instant. Baker McKenzie's analysis suggests businesses should start reviewing contract templates now rather than waiting for Royal Assent.

And here's the part nobody wants to say out loud: most SMEs won't actually claim statutory interest, even once they have the legal right to. They'll be too worried about annoying a big customer. I've watched it happen before — the Late Payment of Commercial Debts Act has existed since 1998, and almost nobody uses it. This Bill has sharper teeth, but the fear is the same. The businesses that will benefit are the ones that use the data not to send interest invoices, but to have a calm, evidence-backed conversation: "You're averaging 73 days. The new law says 60. Let's fix this before it becomes a compliance problem for both of us." That conversation requires numbers. Which brings us back to the spreadsheet.

For a business turning over £5m–£15m, the exercise is manageable. You're probably dealing with a few hundred active customer accounts. The work looks like this:

Pull your full invoice history for the last 12 months. For each invoice, record the issue date, the contractual due date, and the actual payment date. Calculate the gap. Sort by customer. You'll find that maybe 8–12 customers account for the majority of your late-payment exposure. That's your hit list.

It's not glamorous work. It's a spreadsheet, a few hours of cross-referencing, and probably some awkward conversations with your sales team about why certain customers were given 90-day terms in the first place. But the output — a clean, defensible record of who pays late and by how much — is worth real money once the statutory interest provisions kick in.

At the current Bank Rate of 3.75%, base plus 8% gives you an interest rate of 11.75%. On a £50k overdue invoice, that's roughly £16 per day. Over 30 days of lateness across a dozen invoices, that adds up to thousands of pounds a year that you're currently just absorbing.

This week, ask your FD or bookkeeper one question: can we produce an accurate aged-debtor report that shows actual payment dates against contractual due dates for our top 20 customers? If the answer is yes, review it and identify your three worst late-payers. If the answer is no, that's your Monday morning priority — because the Late Payment Bill is going to make that report the difference between absorbing late payments and getting paid what you're owed.

— Aksel

The Analytical Banker is a weekly note on data, analytics, and AI inside corporate banking — written for finance leaders who actually have to make this stuff work. Reply to this email if something here resonates, or forward it to a colleague who'd benefit.