The Commercial Payments Bill has entered Parliament, and it represents the most significant intervention in how UK businesses pay their suppliers in more than 25 years. It has been framed largely as a domestic issue: a response to the £26 billion sitting in overdue invoices at any given time, and the businesses that close every week because they are not paid on time. But for any UK company that pays suppliers, contractors or staff overseas, the Bill lands somewhere they may not have considered. The rules do not distinguish between a payment that is late because it was mismanaged and one that is late because it got stuck somewhere in the international payments chain.
If your business routes money abroad, whether to manufacturers in Asia, contractors in Europe, or suppliers anywhere outside the UK's domestic banking system, it is worth understanding exactly what this Bill changes, and why the businesses most exposed to it may not be the ones you would expect.
The Commercial Payments Bill, sometimes referred to as the Small Business Protections Bill, introduces a maximum payment term of 60 days on most commercial contracts, with only limited exemptions. Where a payment runs late, the purchaser owes interest calculated at 8% above the Bank of England base rate, and that interest cannot be waived away in the small print of a contract. Suppliers also gain the right to a fixed compensation sum where a purchaser raises a dispute late, or without giving proper reasons.
Enforcement sits with a newly empowered Small Business Commissioner, who can investigate complaints and, where a business is found to be in serious or repeated breach, impose financial penalties of up to 1% of annual turnover. For a mid-sized company, that is not a rounding error. It is the kind of number that gets a payment process put in front of the board.
A domestic payment between two UK bank accounts can clear same day. A payment sent abroad rarely works that way. It may pass through one or more correspondent banks, each with its own cut-off time and compliance checks, before it reaches the recipient's account in their own currency. Add in time zone differences, local banking holidays, and the fact that many businesses still wait until the last possible moment to convert sterling into the currency they need, and the margin for error on a 60-day clock starts to look a lot thinner than it does on paper.
This is the part of the Bill that gets missed in most of the commentary aimed at domestic suppliers. A business that instructs an international payment five working days before the deadline, assuming it will land in time, is taking on a risk that has nothing to do with whether it intended to pay on time. It is a process risk, and under the new rules, process risk now carries an interest cost and a regulatory one.
A payment delayed by your bank's international transfer process is treated no differently under the new rules than a payment delayed by poor planning. The clock does not distinguish between the two.
The businesses that come out ahead here will be the ones that treat this as a prompt to tighten up, rather than a problem to manage after the fact. Start by mapping your international payment cycle end to end: how many days genuinely pass between the moment you instruct a payment and the moment your supplier confirms the funds have landed. Most businesses have never measured this precisely, and the answer is often longer than they assume.
From there, build in a realistic buffer rather than relying on the deadline itself. A specialist international payments provider will typically offer clearer cut-off times and faster processing than a high street bank's standard transfer service, which reduces the uncertainty in that final stretch. It is also worth taking last-minute currency decisions out of the critical path altogether. Scheduling payments in advance, or using a forward contract to fix your rate ahead of a known payment date, means the currency conversion is no longer something that has to be resolved under time pressure in the days before a deadline.
Finally, use this moment with your suppliers rather than against them. Clarifying payment terms and expected timelines now, before a dispute arises, costs nothing and heads off exactly the kind of late, under-explained disagreement the Bill is designed to penalise.
If your business pays suppliers, staff or partners overseas, now is the time to look honestly at how that money moves, not just how quickly you sign off the payment, but everything that happens between your instruction and the funds landing. Speak with our team about building an international payment process that keeps you comfortably inside the new deadlines, with currency decisions made on your terms rather than under pressure.
Speak with our team about international payment processes built for speed and certainty under the new rules.