Government Tightens Prompt Payment Requirements for Suppliers

In a significant move announced at the Autumn Statement 2024, the UK Government is taking steps to address a longstanding issue impacting small and medium-sized enterprises (SMEs): late payments. Starting from 1 October 2025, the average invoice payment days threshold for Government suppliers will be reduced from 55 days to 45 days. This policy adjustment aims to unlock £20 billion tied up in unpaid invoices and support improved cash flow for SMEs across the UK.

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Prompt payment has always been a cornerstone for building resilient supply chains, and this latest change underscores the Government's commitment to supporting small businesses by fostering faster, more reliable payment practices. Late payments create cash flow challenges that put SMEs at risk, potentially hampering their growth and ability to operate effectively. The updated threshold aims to mitigate these risks by ensuring that invoices are paid more swiftly, providing the stability that smaller suppliers need.

What This Means for Government Suppliers

From 1 October 2025, any supplier bidding for central Government contracts worth more than £5 million annually must meet stricter prompt payment requirements. Specifically, suppliers must:

• Report average payment days of 45 or fewer in either of the previous six-month reporting periods.
• Continue to meet the requirement of paying 95% (or 90% with an action plan) of invoices within 60 days.

These requirements are part of the conditions of participation when bidding on Government contracts, meaning non-compliance could disqualify companies from securing lucrative opportunities.

Businesses already reporting payment performance under the Reporting on Payment Practices and Performance Regulations 2017 can use their most recent six-month data during bidding. Newer data covering at least three months may also be acceptable, providing flexibility for suppliers to demonstrate their prompt payment capabilities.

How TISCreport Can Help

TISCreport holds relevant data that can help suppliers meet these prompt payment requirements effectively. By using TISCreport, suppliers can:

• Access up-to-date data on payment practices, helping them track and report their compliance with the new thresholds.
• Benchmark their performance against industry standards to identify areas for improvement.
• Demonstrate transparency and commitment to ethical practices, which can enhance their credibility when bidding for Government contracts.

TISCreport's transparency data can help suppliers evidence their payment performance, ensuring they are well-prepared to meet the Government's prompt payment requirements. This is particularly important for maintaining eligibility for high-value Government contracts and fostering positive relationships within supply chains. By leveraging TISCreport, suppliers can not only improve their payment practices but also build resilience and trust—key elements for long-term success.

Preparing for the Change

With the implementation date set for October 2025, Government suppliers have ample time to prepare. Companies should review and update their internal payment policies and procedures to align with the new standards. By ensuring compliance, businesses can not only enhance their eligibility for government contracts but also foster stronger relationships within their supply chains. Prompt payment not only supports growth but also builds trust—a crucial component for resilient and effective partnerships.

As the Government seeks to unlock billions in unpaid invoices and improve cash flow across the board, this move represents a significant step towards fairer business practices and a stronger economy overall. By supporting SMEs, the backbone of the UK economy, the reduction in payment terms will help create a more sustainable environment for all involved.

For more information on the updated payment standards and guidance on how to comply, businesses are encouraged to review the full guidelines provided by the Crown Commercial Service.