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By Owen Pritchard, Senior Writer, SME Cashflow & Data. Published 2 June 2026. Last updated 13 July 2026.
Late payment gets talked about as a nuisance — an irritation directors grumble about and then absorb. That framing is the problem. A payment that arrives a month after it was due has a measurable cost, and for a small limited company that cost lands in four separate places at once. This article puts a structure, and some clearly labelled illustrative numbers, on what "the customer paid late again" actually costs.
Start with the size of the gap
In our own modelled figures — the Credicorp UK SME Cashflow Timing Dataset 2026, an illustrative model built from our lending experience, not a survey — the median gap between issuing an invoice and the cash arriving is 34 days, and a late customer invoice is the single largest trigger for short-term borrowing, at 28% of modelled borrowing events. Treat those as what they are: modelled, directional figures. The point they make is structural, though. For a company invoicing on 30-day terms, "late" does not mean day 31 — it means the working month after the working month you already waited.
Cost one: financing the gap
Cash the customer is sitting on is cash the company has to source from somewhere else — an overdraft, a facility, a loan, or the director's own patience with an unpaid salary. Each has a price.
An illustrative example, labelled as such: a company is owed £4,000, paid 30 days late. If it covers that hole with an overdraft at a typical double-digit annual rate, a month's interest is in the tens of pounds. If it borrows short-term at a daily rate, the cost is precise and visible. On our own pricing — 0.25% per day — a £500 bridging loan over 60 days costs £75 in interest plus a £5 establishment fee. Representative example: borrow £500 for 60 days, repay £580. An early-settlement charge may apply. Whichever tool is used, the interest is a direct transfer from the small company to nobody — pure cost created by the payer's delay.
Cost two: the chasing time
Chasing is work. Statements, reminder emails, the awkward phone call, the re-sent invoice "for the right PO number this time". In a company of two or three people that work is done by the director, and every hour of it displaces an hour of billable or productive time. As an illustration only: a director whose time is worth £50 an hour to the business, spending three hours a month on credit control, is spending £1,800 a year chasing money the company already earned. Larger small companies eventually hire the function — a part-time credit controller is a real salary paid to collect revenue that was contractually due anyway.
Cost three: the discounts and the terms you concede
Companies squeezed by slow payers routinely buy their way out. Early-settlement discounts ("2% if you pay within 10 days") are a real price cut given to customers who should simply pay on time. Invoice finance advances cash against the debt but takes a percentage for doing so. Both are rational responses; both quietly shave the margin the company thought it had earned. A 2% prompt-payment discount on £100,000 of annual invoicing is £2,000 a year — again, an illustrative figure, but the arithmetic is yours to run on your own sales ledger.
Cost four: the work you cannot take
The least visible cost is opportunity. A company holding 18 days of cash cover — the median in our modelled dataset — cannot comfortably take on a big job that requires materials up front while a large invoice sits unpaid. Work gets declined, or delayed, or done smaller than it could have been. No line in the accounts records this, which is exactly why it is worth naming.
What the law already gives you
Directors are often surprised to learn that late commercial payment already carries statutory consequences. Under the Late Payment of Commercial Debts (Interest) Act 1998, a business creditor can charge statutory interest at 8% plus the Bank of England base rate on overdue commercial debts, plus fixed compensation of £40, £70 or £100 per invoice depending on the debt's size. Most small companies never invoke it, for the obvious commercial reason — nobody wants to bill their biggest customer for interest. But quoting it in your terms, and referencing it in a final reminder, changes the tone of a conversation. The right exists, and it strengthens your negotiating position even if you never bill a penny of it.
Pricing it changes the decision
Once late payment is priced — financing cost, chasing hours, conceded discounts, declined work — several decisions look different. Credit-checking a new customer before extending 30-day terms stops being paranoia and starts being underwriting. Taking card or Direct Debit payment for smaller accounts stops being an admin preference and starts being margin protection. And when a genuinely temporary gap does open, bridging it deliberately with a small, fixed-cost, short-term facility — and pricing that against the alternatives — is a calculation, not a distress signal. We set out when that is and is not the right call in when not to take a short-term business loan.
The summary is blunt. Late payment is not weather. It is a cost line, it can be measured, and most of the ways to reduce it — tighter terms, faster invoicing, the statutory interest right, deliberate bridging — are available to any company that has put a number on the problem first.