Fair Payment, stronger business: How better payment practices support small business in the UK

Month in, month out, small business owners face the same frustration: incoming bills and outstanding invoices. No matter how many polite reminders you send, the persistent late-payment problem is seemingly unavoidable. 

In today’s economic climate, where cash flow is a primary concern for business owners, timely payment is a necessity, not a luxury. 

Here we look at the impact of late payments on small businesses and the wider UK economy, as well as what Funding Circle are doing to ensure fairer payments for small business owners. 

Late payments cost the UK economy £11 billion a year

Late payments aren’t just an operational frustration for UK businesses; they’re also impacting the way businesses operate and the potential longevity of a business. The latest government-commissioned research shows that late payments cost the UK economy almost £11 billion each year, contributing to 38 business closures every day, job losses and stalled investment. 

And it’s small businesses that feel the impact most. Research shows that a greater proportion of their turnover is tied up in unpaid invoices. So, while larger businesses are more likely to experience late payments, smaller companies are more exposed to cash flow problems, making them more vulnerable to financial strain and disruption.

Collectively, UK businesses are owed around £26 billion in overdue payments at any given time – cash that could otherwise be used to pay staff, invest in growth, or keep day-to-day operations running smoothly.

It’s not just cash flow that’s affected. When invoices are paid late, staff hours are lost to chasing overdue invoices. This is time that could otherwise be spent growing the business, supporting customers, or focusing on innovation. 

Why fixing payment culture matters now

With 84% of late payments coming from UK customers, the research highlights a clear opportunity for economic improvement through better payment practices. The analysis suggests that reducing poor payment behaviour by just 10% could deliver nearly £1 billion in economic benefits every year, through fewer closures, higher investment and improved productivity.

Fair Payment Code 

We know that late payments are a massive pain point for small business owners. As part of our commitment to backing small businesses to win, it's important to us that we practice what we preach and pay our suppliers fairly. 

So we're delighted to have been awarded the Silver Fair Payment Code accreditation by the Small Business Commissioner. It recognises companies that treat their suppliers (especially those that are small businesses) fairly and, crucially, pay them on time. 

By paying 95% of invoices to our suppliers within 60 days and 95% of our small business invoices within 30 days, we are giving our suppliers the certainty they need.

Managed by the Office of the Small Business Commissioner, this accreditation is a rigorous standard designed to ensure suppliers are treated fairly and paid promptly. By achieving the Silver level, we are reinforcing our dedication to transparent communication and ethical payment practices.

Help with managing cash flow caused by late payments

For business owners, late payments increase risk, reduce resilience, and limit opportunity. Every hour spent chasing invoices is time not spent growing the business, hiring staff, or improving products and services. Payment uncertainty makes planning harder and undermines confidence in future investment. 

FlexiPay from Funding Circle gives business owners the flexibility to manage cash flow, ensuring that even if invoices are delayed or unpaid, they have the funds to keep operations running smoothly.

You can find out more about FlexiPay on our website, where you can apply in three minutes and get an instant decision.

02/02/26: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.