The Late Payment Problem – And How We (try to) Fix It

Published on 27 February 2025

Late payments are one of the biggest headaches for businesses. I see it all the time. And it’s not just frustrating; it can be genuinely dangerous, threatening a company’s survival. It’s a topic that comes up constantly in conversations with our clients because, at the end of the day, cash flow is king and not having cash is what kills a company. When invoices aren’t paid on time, everything grinds to a halt, and the ripple effects can be brutal.

That’s why the new Fair Payment Code caught my eye. Companies House has introduced it to tackle the issue of businesses being left out of pocket due to slow or overdue payments. It’s a step in the right direction, and I genuinely believe it could make a difference for business owners, IF implemented properly.

You can read the article from companies house here

If not implemented properly, the problem of late payers will persist and it will cause real problems like:

• Struggling to pay suppliers, damaging crucial relationships.
• Delaying new opportunities/investments that could drive growth.
• Making tough decisions like postponing wages or cutting essential costs, just to stay afloat.

These are real challenges that affect businesses daily. While initiatives like the Fair Payment Code aim to address the root cause, the reality is that many businesses need immediate solutions to bridge cash flow gaps.

Bridging the Gap

That’s where smart finance solutions like invoice financing or working capital loans come in. At Crown we help businesses unlock cash that’s tied up in unpaid invoices or access cashflow funding to keep things moving. It’s about giving business owners the breathing space to stay in control; whether that’s paying suppliers, covering wages, or seizing an opportunity that just can’t wait.

And look, I get it, chasing overdue invoices is awkward, I hate doing it myself because no one wants to damage client relationships. But at the same time, you’ve done the work, and you deserve to be paid. This is exactly why initiatives like the Fair Payment Code are so important.

So, What Is the Fair Payment Code?

The Fair Payment Code (FPC) is a government-backed scheme that rewards businesses for good payment practices, especially when dealing with smaller suppliers. Unlike its predecessor, the FPC introduces three levels of recognition:

Gold – Pays at least 95% of invoices within 30 days.

Silver – Pays 95% of invoices within 60 days, including 95% of small business invoices within 30 days.

Bronze – Pays 95% of invoices within 60 days.

Any business signing up must agree to the Code’s principles of being “clear, fair, and collaborative” with suppliers.

But here’s the catch: it’s voluntary. So how many firms will actually sign up? And what happens to those that don’t? Are we just patting the good payers on the back while ignoring the worst offenders? If there are no real consequences, will anything really change for SMEs struggling with late payments?

A Simple (But Probably Unworkable) Fix

I’ve got a straightforward solution – one that, in theory, could work wonders but would probably never survive the bureaucracy from the powers that be!

• Make 30-day payment terms the industry standard – no exceptions.
• Once a payment is overdue, HMRC steps in. They enforce an interest rate of 5% per month plus a 10% immediate late payment charge, no more 4% above base (the current interest rates almost encourage late payment and who even calls the interest in…).
• HMRC becomes the creditor – allowing them to recover debt faster and more effectively. They could even offset overdue payments against VAT refunds, ensuring businesses get their money while the government gets a cut, say 50% of the interest charged (helping tackle this supposed £40bn national debt hole in the process).

Oh, and while we’re at it – ban retention in construction. Let’s be honest, how many contractors ever actually get their 5% retention money back? It’s basically an unofficial tax imposed by the big players.

Getting Paid on Time Shouldn’t Be This Hard

The Fair Payment Code is a good step forward, but businesses still need real solutions to keep things running smoothly when payments are delayed. That’s why we focus on practical finance options that give business owners control over their cash flow.

If you’re worried about late payments, cash flow gaps, or funding growth, here are some key steps to protect your business until my “shower thought” about HMRC collecting the debt comes to fruition:

Check Credit Reports & Scores

• Pull business credit reports from Experian, Equifax, or Dun & Bradstreet.
• Watch out for past defaults, late payments, or high credit utilisation.

Leverage Industry Contacts

• Every industry is small and reputation matters.
• Ask for trade references and check with trusted connections before working with a new client.

Set Clear Credit Limits & Terms

• Start with a small credit limit and increase it as trust builds.
• Stick to shorter payment terms (net 15 or 30 days) before offering extended terms.

Use Finance to Stay Ahead

• Secure a cash buffer with sensible, affordable finance options.
• Take advantage of government-backed schemes like the Growth Guarantee Scheme.
• With £275M+ funded, 250+ 5-star reviews, 90+ lenders, and an expert team, Crown can help you find a funding solution tailored to your needs.

Regularly Review Creditworthiness

• Reassess client creditworthiness every 6 to 12 months.
• Set up Google News alerts and Creditsafe notifications to stay ahead of potential issues.

At the end of the day, you deserve to be paid on time. We’re here to help make sure that happens, whether through smart financial strategies or real-time funding solutions that keep your business moving forward.

Because cash flow shouldn’t be an afterthought – it should be your superpower. 👑

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