The UK Government’s proposed Commercial Payments Bill could mark the most significant reform of business payment practices in recent time. Following its Second Reading in the House of Lords at the beginning of June, the Bill received broad cross-party support, reflecting growing recognition that late payments remain a major challenge for UK businesses, particularly SMEs.
The legislation proposes to introduce a maximum 60-day payment term for commercial contracts, alongside stronger powers for the Small Business Commissioner and tougher measures aimed at tackling poor payment practices.
While the Bill is primarily designed to improve cash flow for suppliers, it also creates new pressures for organisations responsible for managing invoices, approvals and payments. For many businesses, complying with stricter payment expectations will be difficult without modernising their Accounts Payable processes.
Why the Government Is Taking Action
Late payment has long been an issue across UK supply chains. Late payments are estimated to cost the UK economy around £11 billion every year, while approximately 38 businesses close each day because they are waiting to be paid. Small business owners reportedly spend an average of 86 hours a year chasing overdue invoices.
Despite previous reforms, many organisations continue to operate lengthy payment cycles that can stretch to 90, 120 or even 180 days. The Government believes these practices place an unfair burden on suppliers, particularly smaller businesses that rely on steady cash flow to operate and grow.
The Commercial Payments Bill aims to address this by creating clearer expectations around payment performance and increasing accountability for organisations that consistently pay late.
The Proposed 60-Day Payment Term Limit
One of the most significant aspects of the Bill is the introduction of a statutory maximum payment term of 60 days for commercial contracts, subject to certain exemptions. Contractual terms that exceed the permitted limit could become unenforceable under the new legislation.
While exemptions are expected for some situations, such as agreements between large organisations or certain international trade arrangements, the message from Government is clear: excessive payment terms should no longer be a routine business practice.
For finance leaders, this creates an important question:
Can your existing AP processes consistently support compliance with a 60-day payment window?
Many payment delays are not caused by a lack of willingness to pay suppliers. Instead, they stem from inefficient internal processes.
Invoices may sit unread in shared inboxes. Approval requests become stuck in email chains. Supporting documents are difficult to locate. Disputes are identified too late. Manual data entry introduces errors and bottlenecks.
Businesses that continue to rely on manual invoice processing may find themselves struggling to meet regulatory expectations, maintain supplier relationships and avoid reputational damage.
How AP Automation Supports Compliance
Accelerating Invoice Processing
Intelligent invoice and data capture eliminate the delays associated with manual processes. Invoices are processed faster and become visible to finance teams immediately upon receipt.
This shortens the overall invoice lifecycle and gives organisations more time to review, approve and pay within the proposed 60-day timeframe.
Streamlining Approval Workflows
One of the biggest causes of payment delays is the approval processes.
AP Automation routes invoices automatically to the appropriate approvers based on predefined business rules. Escalations, reminders and workflow tracking help ensure invoices do not become trapped in someone’s inbox while payment deadlines continue to approach. Using a no PO no Pay rule and integrating a purchasing solution means invoices are automatically approved when matched with the PO, enabling a true touchless process.
Improving Visibility
Many finance teams struggle to answer simple questions such as:
- Which invoices are awaiting approval?
- Which invoices are approaching payment deadlines?
- Where are the process bottlenecks?
AP Automation provides real-time visibility across the entire invoice process, allowing teams to proactively manage workload and prioritise invoices that require urgent attention.
Reducing Invoice Disputes
The Bill is also expected to introduce stronger measures around invoice disputes and payment resolution.
Automated matching against purchase orders and goods receipt records helps identify discrepancies early, allowing issues to be resolved before they delay payment.
This not only improves compliance but also strengthens supplier relationships.
Stronger Governance and Reporting
The proposed legislation would require greater transparency around payment performance, particularly for larger businesses with poor payment records. Some organisations may need to publicly explain why payments are delayed and what actions are being taken to improve performance.
This places increased importance on accurate reporting and auditable processes.
AP Automation creates a complete digital audit trail showing:
- When invoices were received.
- When they were matched, coded and approved.
- By whom and when.
- How long approvals took.
- When payments were issued.
This level of visibility supports better governance and makes demonstrating compliance significantly easier.
Supplier Relationships
Prompt payment is increasingly viewed as a measure of corporate responsibility and operational maturity. Businesses that consistently pay suppliers on time are more likely to be viewed as trusted trading partners, particularly by smaller suppliers that depend on predictable cash flow. Reporting on payment practises and making use of the Government Fair payment Code award is also great for Employer Branding and general marketing purposes. Positioning the organsiation as a good payer is an incentive for supplier contracts and streamline procurement practices.
By reducing processing delays and improving payment performance, AP Automation helps organisations build stronger, more resilient supplier networks.
Looking Ahead
Although the Commercial Payments Bill is still progressing through Parliament, the direction of travel is unmistakable. The Government is seeking to reduce late payments, improve supplier protection and create greater accountability for payment performance across UK businesses.
Organisations that invest in AP Automation today will be better positioned to:
- Process invoices faster.
- Improve approval efficiency.
- Enhance payment visibility.
- Reduce compliance risk.
- Strengthen supplier relationships.
- Meet evolving regulatory expectations.
- Beter cashflow forecasting with real time reporting.
As payment regulations continue to evolve, automated Accounts Payable processes will move from being a competitive advantage to becoming a business necessity.
