The number that should worry every small business owner

£26 billion. That is what UK small businesses are owed in late payments at any given moment, according to government-commissioned research from the Department for Business and Trade and the Office of the Small Business Commissioner, carried out by London Economics. We read that figure twice before we believed it. It is not a backlog that clears itself every quarter. It is a standing debt, always outstanding, always somebody else’s cash sitting in somebody else’s account.

The same research puts a number on what it costs to chase that money back: 133 million hours of staff time every year across the UK economy, an average of 86 hours per affected business. That is more than two working weeks a year spent on hold, drafting reminder emails and reconciling who has actually paid, for a business that could be using that time to do the work it is actually good at.

Why this is suddenly urgent, not just annoying

We would normally file late payment under “the cost of doing business”, the way everyone does. What changes that this year is Westminster. The government has introduced the Small Business Protections Bill, described as the biggest crackdown on late payment in more than 25 years and intended to give the UK the strongest legal framework on payment terms in the G7. It caps payment terms for large firms at 60 days, makes interest on late payments mandatory rather than optional, bans the practice of retentions in construction, and hands the Small Business Commissioner new powers to investigate poor payers, resolve disputes without going to court, and fine persistent offenders, with penalties that could run into tens of millions for the worst repeat cases.

That is genuinely good news, and the Federation of Small Businesses has been pushing for it for years, so it has been a long time coming. But it is also, on its own, not a fix for the business waiting on an invoice this month. A Bill takes time to pass, guidance takes longer to bed in, and even once it is fully in force, a business still has to notice the invoice is late, still has to chase it, and still has to know when a customer has crossed the line from “running behind” to “not paying”. The legislation changes the incentives on the other side of the table. It does not do the noticing or the chasing on yours.

The government’s own modelling is blunt about what happens when nobody does. Its research links an estimated 14,000 business closures a year to late payment, roughly 38 a day, and that is before counting the businesses that survive but never hire the extra person or take the lease on the bigger unit because the cash they are owed never turns up on time. Growth that gets funded by your own overdue invoices is growth that is one bad debtor away from stalling.

What we would actually tell a client to do this month

We have built automations for clients who were losing whole afternoons a week to this exact problem, and the fix is rarely a bigger finance team. It is usually a smaller, more consistent one, run by software. Modern accounting platforms like Xero and QuickBooks already carry basic AI-assisted reminder sequences, and dedicated credit control tools such as Chaser, a UK-built platform, go further, reading who has and has not paid, sending reminders in an escalating tone from polite to firm, and flagging the accounts that need a human phone call rather than another email.

None of this needs a developer. It needs someone to sit down for an afternoon and connect the accounting software that is probably already running to a chasing sequence that runs itself. The uncomfortable truth is that most small businesses we speak to already own software capable of most of this and have simply never switched it on.

The trade-off worth naming

Automated chasing is not free of judgement calls. A reminder sequence that goes out mechanically can land badly with a genuinely good customer who is a week late for an ordinary reason, so the sequence needs a human review step before anything escalates to a final notice or a debt recovery referral. And software will not repair a relationship a founder has let slide for six months. It is a way of making sure nothing falls through the cracks by accident, not a replacement for judgement on the accounts that need it.

What to check before the law does the work for you

Three questions are worth asking this week. First, do you know, right now, without opening a spreadsheet, how much is currently overdue to your business and from whom. Second, does anything chase that automatically, or does it only happen when someone remembers, usually the same person who is already doing three other jobs. Third, if the answer to the second question is “when someone remembers”, what would it take to switch on the reminder sequence that is very likely already sitting inside the accounting software you pay for every month.

If you are starting from nothing, the order that tends to work is: turn on your accounting platform’s own automated reminders first, since that costs nothing extra and catches the easy cases within a week. Then set a rule for what happens after two reminders go unanswered, whether that is a firmer automated notice, a phone call from a real person, or both, so a genuinely struggling customer is never mistaken for one who is just slow. Only after that is in place is it worth looking at a dedicated credit control platform for the accounts that need more persistence than a template email can manage.

None of this requires writing off the relationship side of the job. The businesses that get this right are not the ones that chase hardest, they are the ones that never let an invoice go quiet long enough to need chasing hard in the first place, and that consistency is exactly what software is good at and humans, stretched across everything else a small business needs from them, are not.

The bottom line

£26 billion sitting unpaid across the country is a policy problem for Westminster to solve over the next couple of years, and the Small Business Protections Bill is a real step towards solving it. The 86 hours a typical affected business loses chasing its own share of that figure is a problem you can start fixing this week, with tools you may already own and without waiting for a single clause of that Bill to reach the statute book.