Why some large UK companies deliberately pay small suppliers late

It’s one of the most frustrating realities for a UK small business owner. You deliver excellent work for a large, well-known corporate client, submit your invoice correctly, and then… silence. Weeks, sometimes months, pass beyond your 30-day terms. When you finally get paid, it’s long after you’ve had to pay your own staff, rent, and suppliers. This isn’t a rare occurrence; for many large companies, it’s a deliberate financial strategy.

This article pulls back the curtain on why many large UK corporates systematically pay their small suppliers late. We’ll explore the working capital incentives that drive this behaviour and, most importantly, lay out the specific legal rights and practical steps you can take to fight back and get your invoices paid on time.

The Corporate Finance Game: Why Your Invoice Is Paid Late on Purpose

To a small business, an invoice is a request for payment for work done. To a large corporation's finance department, your invoice is something else entirely: a line item in their ‘Accounts Payable’ ledger. Delaying payment on that ledger is a powerful tool for managing a metric they care about deeply: working capital.

It’s Not Personal, It’s a Cash Flow Strategy

Working capital is, in simple terms, the money a business has available to fund its day-to-day operations. It's calculated as Current Assets minus Current Liabilities.

• Current Assets: Cash in the bank, money owed by customers (Accounts Receivable).
• Current Liabilities: Money owed to suppliers (Accounts Payable), short-term loans.

When a large company delays paying you, they are increasing their Accounts Payable. This reduces their net current liabilities, which directly increases their available working capital. They are effectively holding onto their cash for longer, allowing them to use it for other purposes, such as investment, operations, or simply earning interest.

By paying you 60 or 90 days late, they are giving themselves an interest-free loan. The source of that loan? Your business. This isn't usually the decision of your day-to-day contact in the marketing or operations department. This policy is often driven from the top by a Chief Financial Officer (CFO) or treasury department, whose performance is judged on metrics like cash flow and Days Payable Outstanding (DPO). A higher DPO looks good on their internal reports, even if it causes immense stress down the supply chain.

The Power Imbalance and the Cost of Capital

Large corporations know they have the upper hand. They understand that a small supplier is often hesitant to aggressively chase a customer that might represent 20%, 50%, or even 80% of their annual revenue. The fear of jeopardising the relationship and losing future work is a powerful deterrent.

Consider the maths from their perspective:

• Option A: Borrow from a bank. A corporate overdraft or revolving credit facility might cost them an interest rate of anywhere from 5% to 10% APR.
• Option B: Pay 1,000 small suppliers £5,000 each, 30 days late. This frees up £5 million in cash for a month. The cost? Zero, unless the suppliers enforce their legal rights, which many don't.

Even if a supplier does eventually charge statutory interest, the administrative process for the large company is often less than the cost of formal borrowing. They are playing a numbers game at a scale where holding onto cash across thousands of suppliers adds up to millions of pounds of benefit.

Your Legal Toolkit: What the Law Says About Late Payment

Fortunately, UK law provides a robust framework to protect suppliers from late payment. The key piece of legislation is the Late Payment of Commercial Debts (Interest) Act 1998. This act applies to the commercial supply of goods and services where there isn't a different provision for interest in your contract.

Statutory Interest: Your Right to Compensation

If an invoice is not paid by the agreed deadline, you are legally entitled to charge "statutory interest".

The formula for this interest is: 8% + the Bank of England's base rate.

The Bank of England base rate can change, so you should always check the current rate that was in effect during the period the debt was late. The rate is set per 6-month period (1st Jan - 30th June, 1st July - 31st Dec).

To calculate the interest owed on an invoice:

1. Find the annual statutory interest rate (e.g., if the base rate is 5.25%, the total rate is 8% + 5.25% = 13.25%).
2. Calculate the daily interest: Invoice Amount (inc. VAT) x 0.1325 / 365.
3. Multiply the daily interest by the number of days the payment is overdue.

For example, on a £10,000 invoice that is 45 days late, when the base rate is 5.25%:

• Interest = £10,000 x (0.1325 / 365) x 45 = £163.36

This is your legal entitlement. You do not need to have pre-agreed it in your terms for it to apply to most UK B2B invoices.

Fixed Sum Compensation: Covering Your Costs

In addition to interest, the law also entitles you to claim a one-off fixed compensation sum for every late invoice. This is designed to cover the costs of recovering the debt. The amount you can claim depends on the value of the invoice.

Invoice Value	Fixed Compensation Sum
Up to £999.99	£40
£1,000 to £9,999.99	£70
£10,000 or more	£100

Crucially, this is applicable per invoice, not per customer. If a client has five outstanding invoices of £2,000 each, you can claim £70 for each one (£350 total), plus the statutory interest on each.

From Theory to Practice: A Strategy to Get Paid

Knowing your rights is one thing; getting the money into your bank account is another. Dealing with a large corporate client requires a systematic and professional approach.

Step 1: Lay the Groundwork Before You Start

The best credit control starts before the invoice is even raised.

• Clear Terms: Ensure your payment terms (e.g., "Strictly 30 days") are clearly stated on your quote, contract, and every invoice.
• Get a Purchase Order (PO) Number: Most large companies operate a "no PO, no pay" policy. Their accounts payable (AP) systems are physically unable to process an invoice without a valid PO number. Get this from your client contact before you begin any work.
• Identify the AP Contact: Do not assume your day-to-day contact is responsible for payment. Ask them upfront: "To ensure smooth payment, could you please provide the correct email address for your accounts payable department?" Send your invoice there directly, and CC your main contact.

Step 2: The Polite, Professional Chasing Process

As soon as an invoice is due, the chase should begin. It should be firm, professional, and consistent. A sporadic, emotional email every few weeks is easy to ignore. A systematic process shows you are serious.

This is where automation becomes a powerful ally. Instead of manually tracking due dates and sending emails, you can establish a clear escalation path. A typical automated sequence might look like this:

• 7 days before due date: A polite "heads-up" email.
• On the due date: A reminder that payment is now due.
• 7 days overdue: A firmer reminder, asking them to confirm when payment can be expected.
• 14 days overdue: A more serious email, referencing the specific invoice and previous communications.

Using a tool that integrates with your accounting software (like Xero, QuickBooks, Sage, or FreeAgent) makes this effortless. Products like InvoiceReminder are built specifically for this, automating the entire email chasing sequence so you don't have to think about it. This frees you from the manual admin and ensures no overdue invoice is forgotten.

Step 3: Pick Up the Phone

If your automated reminders are being ignored after 1-2 weeks, it's time to escalate to a phone call. Crucially, call the main Accounts Payable department, not your friendly operational contact.

When you call, have the following to hand:

• Invoice Number
• Invoice Date and Due Date
• Invoice Amount
• Purchase Order (PO) Number

Be polite but direct. A good script is:

"Hello, I'm calling from [Your Company Name] to follow up on invoice [Number] for [Amount], which was due on [Date]. The PO number is [Number]. Could you please confirm the status of this payment and provide a specific date for settlement?"

Note down who you spoke to, the date, and what was promised. Follow up with an email confirming the conversation.

Step 4: Formally Invoke Your Statutory Rights

If the payment is now significantly overdue (e.g., 30 days past the due date) and your polite chasing has failed, it's time to send a Letter Before Action.

This is a formal letter or email that states:

1. The invoice details (number, date, amount).
2. The number of days it is overdue.
3. Your intention to apply statutory interest and the fixed compensation sum as per the Late Payment of Commercial Debts (Interest) Act 1998 if the original invoice amount is not paid within a final deadline (e.g., 7 working days).
4. A calculation of the interest and compensation owed to date.

Often, the mere threat of these statutory additions is enough to get the invoice escalated internally. The finance or legal team in a large company knows the law. They will often approve the original payment immediately to avoid the hassle and extra cost of a formal debt recovery process.

Step 5: The Final Resort – Money Claim Online

If even a Letter Before Action is ignored, your final step is to start a small claims court proceeding. This is not as daunting as it sounds. The UK Government's Money Claim Online (MCOL) service allows you to make a claim digitally for a fixed fee.

This is a serious step that will likely end your commercial relationship with the client. However, if a company owes you thousands of pounds and is refusing to pay, it may be the only way to recover your money. You have already done the work; you are entitled to be paid for it.

Holding Big Business to Account: Transparency and Support

Beyond chasing individual invoices, there are broader mechanisms you can use to assess and challenge the behaviour of large clients.

The Duty to Report on Payment Practices

Since 2017, large UK companies and LLPs have been legally required to report on their payment practices and performance twice a year. This data is published on the gov.uk website and is fully searchable.

Before you even agree to work with a new large client, you can look them up and see:

• Their average time to pay invoices.
• The percentage of invoices paid beyond agreed terms.
• The percentage of invoices not paid within 60 days.

If a potential client's report shows they pay 80% of their invoices late, you can go into the relationship with your eyes open. You might decide to demand shorter payment terms, ask for a portion of the fee upfront, or simply decline the work if the risk to your cash flow is too high.

The Small Business Commissioner (SBC)

The office of the Small Business Commissioner exists to help small businesses tackle issues like late payment. They offer a free and impartial service to mediate disputes with larger customers.

While their recommendations are not legally binding, the SBC can "name and shame" companies with poor payment practices. Engaging the SBC is an excellent intermediate step before resorting to legal action, providing an official, independent voice to support your case.

Frequently asked questions

Can a large company force me to accept 90 or 120-day payment terms?

They can if it's written into the contract and you agree to it. However, the law states that payment terms beyond 60 days must not be 'grossly unfair' to the supplier. While 'grossly unfair' is a high bar to prove, it gives you grounds to challenge exceptionally long terms, especially if they are imposed without negotiation. Always try to negotiate terms before signing a contract.

Do I have to charge statutory interest, or can I just ask for the invoice amount?

You are not obligated to charge interest; it is your right, not a requirement. You can choose to waive it, perhaps as a gesture of goodwill if the client pays the principal sum promptly after you send a Letter Before Action. However, the threat of applying interest and compensation is one of the most powerful tools you have.

What if they claim they never received my invoice?

This is a classic delaying tactic. To prevent this, always send invoices to the designated accounts payable email address and use accounting software or an email system that provides delivery and read-receipts. When you chase, your first question should be "Can you please confirm you are in receipt of invoice number [X] sent on [Date]?". If they say no, send it again while you are on the phone with them and ask them to confirm its arrival.

Will chasing a large client for payment damage our relationship?

A professional, systematic, and polite chasing process is standard business practice and should not damage a relationship. It shows you run an efficient business. It's aggressive, emotional, or accusatory communication that causes problems. Remember, the AP department is usually entirely separate from the people who commission your work; they expect to be chased.

What is the Prompt Payment Code (PPC)?

The Prompt Payment Code is a voluntary scheme administered by the Small Business Commissioner. Signatories pledge to uphold best practices, which includes paying 95% of invoices from small businesses (those with fewer than 50 employees) within 30 days. You can check if your client is a signatory on the PPC website. If they are, and they are paying you late, you can remind them of their public commitment.

Can I use a debt collection agency for a large corporate client?

Yes, you can. However, this is a major escalation and should be considered a last resort before court action. Using a third-party debt collector will almost certainly terminate your commercial relationship with the client. It is a step best reserved for situations where you have accepted that you will not be doing any more work for them and your sole objective is to recover the outstanding funds.

Stop Chasing, Start Automating

Dealing with late payment from large companies is a drain on your time, energy, and cash flow. While knowing your legal rights and chasing strategies is essential, preventing the problem in the first place is even better. A consistent, automated follow-up process ensures invoices are never forgotten and shows large clients that you are serious about your payment terms from day one.

InvoiceReminder helps UK small businesses, freelancers and accountants automate their invoice chasing. It connects directly to Xero, FreeAgent, Sage, and QuickBooks to send scheduled reminders for overdue invoices, following escalation rules you control. This removes the manual work and emotional stress of credit control. The Free plan currently includes unlimited email reminders at no cost, with no card required to sign up. InvoiceReminder is built by the team behind WeCovr, a trusted UK company authorised and regulated by the Financial Conduct Authority, which has arranged over one million insurance policies for UK customers.