Late payment was a problem for 63% of UK small and medium-sized employers that offered customers trade credit in 2025, up six percentage points from 2024, according to official statistics released on 15 October.
The Longitudinal Small Business Survey puts the problem at 28% of all SME employers, up one percentage point. The higher 63% figure applies to firms giving credit, not to all small businesses or to the share of invoices paid late.
Some 44% offered trade credit, meaning customers could pay after receiving goods or services under agreed terms. That was three percentage points lower than in 2024.
The report covers 8,022 employers with one to 249 employees; the trade-credit questions were asked of a survey cohort. Interviews took place between October 2025 and April 2026, so the results are not a real-time measure of October’s payment conditions.
Customer credit leaves the supplier funding the gap
Agreed credit and overdue payment are separate issues. A supplier offering 30-day terms expects to finance an order until its due date. A further delay adds an unplanned demand on cash.
A business may already have paid for materials, wages or delivery before receiving the customer’s money. Recording a sale does not make that cash available for the next payroll.
Our earlier explanation of why profitable businesses can run out of cash examines how payment timing and stock absorb funds. Sales growth can increase the amount waiting to be collected.
For a supplier assessing an order, the relevant figures include the expected margin, the cash needed before payment and how much is already owed by the same customer. A large order can add exposure to a buyer already paying slowly.
Borrowing against invoices brings its own costs
The British Business Bank’s invoice-finance guidance explains how firms can obtain an advance against eligible unpaid invoices. The provider determines the amount available using its risk criteria.
With factoring, the provider also manages the sales ledger and collection. Invoice discounting generally leaves those tasks with the business. Both involve fees and financing charges, and eligibility depends on the invoices and customer risk.
The bank warns that, depending on the agreement, the borrower may remain responsible if the customer does not pay. Advancing a receipt is not automatically protection against bad debt, nor does it make an unprofitable order profitable.
Clear terms help establish when payment is overdue
Current government guidance on commercial debts says businesses can claim interest and recovery costs on qualifying late payments. Where no payment date is agreed, payment is normally late 30 days after the customer receives the invoice or the goods or service are provided, whichever is later.
Establishing the correct invoice, agreed terms and delivery record remains part of collecting the debt. A dispute about what was supplied requires a different response from a customer simply missing the due date.
The survey measures employers’ reports of a problem. It does not establish how much money was overdue, how long individual customers delayed or whether a particular financing product would resolve the shortfall.
