When a customer takes 60 or 90 days to pay an invoice that should have been settled in 30 days, there is another way of looking at the transaction.
You are effectively providing the customer with finance, usually without charging them for it.
Late payment remains a significant problem for smaller businesses, although the latest Government statistics provide some encouraging evidence. Large businesses paid 15% of invoices late during 2025, compared with 25% in 2018. Their average payment time has also fallen from 35 days to 32 days over the same period.
Nevertheless, even a relatively small number of late invoices can create serious cash-flow problems.
Businesses should therefore consider measuring debtor performance rather than simply looking at the total amount outstanding.
Your accounting records should be capable of answering some straightforward questions. Which customers regularly pay late? How much cash is tied up in overdue invoices? How long does it normally take customers to pay? Is the position improving or deteriorating?
Then consider the commercial response.
Invoices should be issued promptly and clearly state the payment terms. Customers approaching their credit limit may need to be contacted before further work is undertaken. Regular late payers might justify different payment arrangements, deposits or staged payments.
There are also statutory remedies. Businesses can, in qualifying circumstances, claim interest and debt recovery costs on late commercial payments. GOV.UK confirms that where a payment date has not been agreed, a commercial payment will generally become late 30 days after the customer receives the invoice or the goods or services are supplied, whichever is later.
Government reforms are also intended to strengthen the late-payment regime, including proposals for maximum payment terms and stronger powers for the Small Business Commissioner.
The practical lesson, however, does not require new legislation.
A profitable business can still run short of cash if customers do not pay promptly. Debtor days should therefore be treated as a management figure rather than something that is examined only when cash becomes tight.