Nelson Advisors: Healthcare Technology Suppliers Take Note, The NHS Is Funding Its Cash Shortfall With Supplier Invoices
There is a number buried in NHS trust annual reports that every healthcare technology supplier should know and it is not a clinical outcome or a waiting list figure. It is the percentage of trade invoices a trust pays on time.
The Better Payment Practice Code asks NHS trusts to pay 95 per cent of their suppliers within 30 days. Across the NHS, the share of trade invoices settled on time has fallen from over 90 per cent in 2023/24 to under 88 per cent in 2025/26. That is a drop of more than two percentage points against a target the service was already missing, and it is happening in an organisation that is meant to be the anchor customer for British life sciences and digital health.
The detail is worse than the headline. An analysis of 172 trust annual reports found at least seven trusts paying fewer than half of their trade invoices within the period, up from four a year earlier. Oxford University Hospitals and East Kent Hospitals University each paid under a third. Oxford pointed to a low cash balance requiring careful management, a phrase that carries more alarm than its bureaucratic wording suggests.
If you sell software, devices, analytics, managed services or consultancy into the NHS, this is not background noise. It is a change in the risk profile of your largest and, for many of you, most strategically important customer. This post sets out what is happening, why it is happening, what it means for suppliers of different sizes, and what you can practically do about it.
What the numbers are actually telling us
Start with the benchmark. The Better Payment Practice Code is a voluntary standard, not a statute, but NHS bodies are expected to meet it and they report their performance in their annual reports. The target is simple: pay 95 per cent of valid invoices, by both number and value, within 30 days of receipt of the goods or a valid invoice, whichever is later.
For years the NHS broadly lived up to this. Performance in the low nineties was common, and while individual trusts had bad quarters, the system-level picture was one of a customer that, whatever its other faults, paid its bills. That is why a fall to under 88 per cent matters. It is not a rounding error; it means that on average more than one invoice in eight is now arriving late, and the average conceals a long tail of trusts doing far worse.
The two trust names that stand out, Oxford University Hospitals and East Kent Hospitals University, are not obscure or unusually troubled institutions in the way people sometimes imagine when they hear about NHS finance problems. Oxford is a large, research-intensive teaching hospital group. When an organisation of that profile reports paying under a third of its trade invoices on time and explains it by reference to a low cash balance, it tells you the problem is structural rather than a matter of a few slow accounts payable teams.
It is also worth noticing the direction of travel. The count of trusts paying fewer than half of their invoices on time went from four to at least seven in a single year. Systems in decline do not usually improve smoothly; they tend to accumulate stress until something forces a reset. Suppliers should assume the trend is more likely to continue than to reverse until they see evidence of a change in the underlying finances.
Why this is a cash problem, not just a budget problem
To understand why late payment is happening, you have to understand the difference between a budget problem and a cash problem. Public sector finance discussions tend to blur the two, but for suppliers the distinction is everything.
A budget problem is a gap between what an organisation planned to spend and what it can afford. It shows up as an operational deficit, as missed savings targets, as a forecast outturn that is worse than plan. A trust can carry a budget problem for a long time. The deficit sits in the accounts, is reported to the regional and national bodies, and is managed through a mixture of recovery plans, negotiated support and accounting treatment. Nothing physically stops working because a trust is £30 million adrift of plan.
A cash problem is different. Cash is what pays the wages of nurses and porters, the energy bill, the drug supplier and the software licence. A trust can carry a deficit on paper for years. It cannot carry an unpaid payroll for a week. When the cash runs low, the finance director has to prioritise, and the priorities are brutally ordered: staff are paid first, because the consequences of not paying them are immediate and politically explosive. Statutory obligations come next. Critical clinical supplies follow. And after those, the long list of everyone else.
That ordering is why the budget problem converts into a supplier problem. The causes of the underlying pressure are familiar. Trusts are running operational deficits. They are missing savings targets, partly because efficiency programmes that looked plausible on paper have proved hard to deliver while demand remains high. And deficit support from NHS England has in some cases been delayed or withheld, which removes a cash lifeline some trusts had been relying on to bridge the gap between expenditure and income.
Each of those is a budget issue. But late payment is the mechanism by which a budget issue is turned into a cash-management tool. When a finance team needs to preserve a cash balance, the invoice queue is the most flexible lever available. Delaying a payment run by a week costs the trust nothing in the short term, causes no immediate operational consequence, and preserves liquidity. Do that across thousands of invoices and the effect is a significant, if unannounced, interest-free loan from the supply chain.
In other words, suppliers become the shock absorber. They extend involuntary credit to a public service, without having agreed to, priced for, or been compensated for doing so.
Why healthcare technology suppliers are particularly exposed
Not every supplier feels this equally, and it is worth being honest about where the exposure lies.
Small and mid-sized digital health companies. For a multinational, a slow-paying customer is an irritation. The multinational has treasury functions, committed credit lines and a diversified customer base, so a late NHS invoice is one of thousands of receivables. For a small medical device manufacturer, a software developer or a facilities contractor, a long wait on an NHS invoice can decide whether wages are met the following month. Many healthcare technology businesses, especially those that grew on venture funding or are in the scale-up phase, run with thin working capital by design. They are optimised for growth, not for financing a customer's liquidity crisis.
Suppliers with concentrated NHS revenue. If a large share of your revenue comes from a small number of trusts, you carry correlated risk. A supplier with a diversified book can absorb one trust paying at 40 days. A supplier whose top three customers are all trusts with a low cash balance cannot. Concentration risk is something investors and lenders look at carefully, and payment behaviour is part of that picture.
Suppliers on milestone-based or implementation-heavy contracts. Many healthcare technology deals involve significant upfront delivery: integration work, configuration, training, data migration. You carry costs for months before the invoice is even raised, and then you wait for it to be paid. When the payment cycle stretches, the working capital requirement of the whole contract grows, often beyond what was assumed in the bid.
Sub contractors and the supply chain beneath you. If you are a prime contractor or a platform provider that relies on subcontractors, late payment from the trust does not stay with you. You either pass the delay down, which damages your own supply chain relationships and may breach your own payment terms, or you absorb it. Either way the problem propagates.
Suppliers on frameworks and through intermediaries. Where you sell through a framework or a managed-service provider, you may be shielded from direct trust payment behaviour, or you may be exposed to it indirectly through the intermediary's own cash flow. It is worth knowing which, because the terms and the risk differ.
The hidden cost: late payment shows up in the price
Here is the part that policymakers often miss. Late payment does not just hurt the supplier that is waiting. It raises prices for everyone.
Suppliers are rational. If they learn that a category of customer pays in 60 days rather than 30, they build the cost of waiting into their quotes. That cost is real: it is the interest on an overdraft or invoice finance facility, the management time spent chasing, the working capital that could have been deployed elsewhere, and a risk premium for the chance that payment slips further. In a competitive tender, a supplier that bids honestly will price that in. The result is that the NHS pays more for the same goods and services, which worsens the budget problem that created the cash problem in the first place. It is a small but genuine doom loop.
Then there is the more damaging response, which is withdrawal. Some suppliers will quietly decline NHS work. They will not announce it. They will simply stop responding to certain tenders, deprioritise certain accounts, or choose to sell their capacity to customers who pay reliably.
For a market that depends on innovation from smaller companies, this is the more corrosive effect, because the companies most likely to walk away are precisely the ones with the least capacity to absorb delay: the start-ups and scale-ups the government says it wants to attract.
The contradiction at the heart of NHS digital ambition
This sits badly with a government that wants the health service to be a better customer for British life sciences and to adopt digital and AI tools at pace. The strategic direction is clear: more technology in the NHS, faster adoption of AI-enabled tools, a single patient record, reformed procurement, and a stronger domestic life sciences sector selling into its own health system.
Every one of those ambitions is a commercial proposition as much as a clinical or policy one. Procurement reform, new frameworks and ambitions for a single patient record all depend on suppliers believing they will be paid. A new framework is only attractive if the call-off contracts beneath it are honoured promptly. A major platform build is only fundable if the supplier can finance eighteen months of delivery on the strength of a customer that settles its invoices. An AI tool that needs iterative deployment across dozens of trusts requires a supplier that can survive the payment cycle of each.
A health service that pays late teaches the market to price it as a credit risk. And once a market has learned to do that, the lesson is hard to unlearn. Credit risk premiums persist after the underlying behaviour improves, because suppliers and their lenders have long memories. The reputation of the NHS as a reliable payer, which took decades to build and which was a real if unspoken competitive advantage in attracting suppliers, can be spent far faster than it can be rebuilt.
It is one of the more uncomfortable truths of the current moment that the NHS is simultaneously asking the market to invest in it and, through its payment behaviour, signalling that investing in it carries more risk than it used to.
What suppliers can do about it
Complaining is understandable but rarely effective on its own. The more productive approach is to treat NHS payment risk as a managed commercial exposure, the way you would treat any other significant credit risk. Here is a practical playbook.
1. Look at trust payment performance before you sign
Trust annual reports publish Better Payment Practice Code performance, both by number and by value of invoices. This is public information, and most suppliers never look at it. Before you bid, and again at every renewal, check the trust's reported performance for the last two to three years and look at the trend, not just the latest figure. Pair it with the trust's reported financial position: cash balance commentary, the going concern disclosures, any reliance on external financial support. A trust paying 60 per cent of invoices on time with a stable improving trend is a different proposition from one paying 35 per cent and deteriorating.
Treat this as part of your bid/no-bid and pricing process. If a trust sits at the bottom of the league table, that should change the terms you are willing to accept, or whether you pursue the opportunity at all.
2. Build realistic payment assumptions into pricing and cash flow forecasts
If you forecast cash on the assumption that NHS invoices are paid in 30 days, you are probably wrong for a growing share of your customers. Model at least two scenarios: the contractual terms, and a realistic case based on the trust's actual performance. Stress-test your business against the second. How many weeks of late payment can you absorb across your top five trusts before you breach a covenant, miss payroll or exhaust your overdraft?
Where the realistic case is materially worse than the contractual one, the right response is to price for it. That may feel uncompetitive, but pricing in a known cost of capital is simply honest. Bear in mind that, as described above, you are not the only supplier doing this.
3. Tighten your own credit control
Late payers are more likely to pay promptly the suppliers who chase them consistently and escalate sensibly. This is not cynicism; it is how finance teams under cash pressure make decisions. Invoices that are accurate, correctly referenced, matched to a valid purchase order and followed up on the due date tend to be paid before those that need investigation.
Practical steps include:
Get the invoice right first time. A large share of late payment is caused by invoices that fail matching: missing purchase order numbers, wrong cost centres, mismatched quantities. Every rejected invoice restarts the clock in practice, even if not in contract.
Build relationships in accounts payable, not just with your clinical or operational sponsor. Know who to call when an invoice is stuck.
Chase on day one past due, not day thirty. Automate reminders and keep a log of every contact. You will need it if you escalate.
Escalate through a defined ladder. Accounts payable, then the finance business partner, then the budget holder, then the director of finance. Most disputes are resolved by the second step. Make sure your sponsors know when you are escalating and why.
4. Know your statutory rights, and decide in advance whether you will use them
In the UK, suppliers have a statutory right to claim interest and fixed compensation on late-paid commercial debts under the Late Payment of Commercial Debts (Interest) Act 1998. In broad terms, statutory interest runs at 8 per cent above the Bank of England base rate, and there are fixed sums payable as compensation on top, scaled to the size of the debt. Public sector contracts are also subject to rules requiring payment of undisputed, valid invoices within 30 days, including through the supply chain.
The existence of the right is one thing; the willingness to invoke it is another. Many suppliers never claim statutory interest because they fear damaging a relationship with a customer that is also their reference site. That is a legitimate commercial judgement, but it should be a conscious one. A middle path is to include a standard late payment statement on your invoices, referencing the statutory entitlement, so that the position is on record, and to reserve the right to claim. Decide in advance at what point, and for what size of debt, you would actually pursue it. You should confirm the current rates and your specific position with your own legal adviser, since details can change and circumstances differ between contracts.
It is also worth knowing that there are routes for raising concerns about payment practices beyond the contract itself. The Small Business Commissioner exists to help small businesses resolve payment disputes with larger customers, and there are channels for escalating concerns about public sector payment behaviour. Using them is not hostile; it is part of the normal toolkit of a business that wants to keep trading.
5. Negotiate payment terms and structure, not just price
Where a trust is a known slow payer, negotiate the contract structure around it. Options include:
Shorter payment periods or earlier milestones. Front-load invoicing where delivery allows, and break large invoices into smaller, more frequent ones. A smaller invoice is easier to pay and easier to chase.
Advance or stage payments for implementation work. If you are carrying significant delivery cost before go-live, ask for a payment on mobilisation.
Clear acceptance criteria and deemed acceptance. Many invoices are held up waiting for sign-off. Build in a deemed acceptance period so that silence does not stall payment.
Late payment provisions in the contract. Express contractual interest, and a right to suspend non-critical services after prolonged non-payment, give you leverage. Suspension of a clinical safety-critical service is rarely an option, so be realistic about what you can credibly threaten.
6. Consider financing the receivable
If you have a book of NHS receivables that you are confident will be paid, just not on time, you can finance the gap. Invoice discounting and factoring facilities let you draw cash against approved invoices, often at a reasonable cost when the debtor is a public body. Trade credit insurance can protect against non-payment and may be a condition of some lenders' facilities. The cost is real and should be priced into your model, but for a growing business it can be cheaper than the alternative of turning away work or missing payroll. Speak to your bank or an independent adviser about whether your receivables book qualifies, and be aware that a lender will look closely at the same trust payment data discussed above.
7. Diversify, deliberately
The oldest advice in credit risk is still the best: do not let any one debtor, or any one class of debtor, represent too large a share of your revenue. For healthcare technology companies, that does not mean abandoning the NHS. It may mean balancing NHS revenue with private healthcare, international health systems, life sciences customers and adjacent sectors such as social care, local government or insurers. It may mean spreading your NHS exposure across trusts in different regions and different financial positions, rather than clustering in a single integrated care system under strain.
8. Make the case collectively
Individual suppliers have little leverage over a trust's cash management. Trade bodies, industry groups and supplier forums have more. Where you are a member of an industry association, make sure it is collecting data on payment performance and putting it in front of NHS England, the Department of Health and Social Care and parliamentarians. Aggregated, anonymised evidence of the effect of late payment on investment decisions, on prices and on supplier participation is far more persuasive than a single company's complaint. The government's own stated ambitions for the life sciences sector give you a legitimate hook: if the strategy depends on supplier confidence, supplier confidence is a policy matter.
What the NHS and its sponsors should do
This post is addressed to suppliers, but it would be incomplete without noting what the system itself could do, because suppliers are entitled to ask for it.
Treat supplier payment as a system-level metric, not a local housekeeping matter. Better Payment Practice Code performance is reported but rarely acted on in a way that carries consequences. If the government is serious about the NHS as a reliable customer, payment performance should sit alongside financial and operational metrics in oversight frameworks, with transparent league tables and an expectation of recovery plans for the worst performers.
Separate the cash-management signal from the budget signal. If deficit support is delayed, the effect on trusts' cash is predictable. Where support is going to be late, the system should provide a mechanism, such as short-term working capital facilities, so that trusts are not forced to use suppliers as their overdraft. Using suppliers to bridge the timing of central funding is the most expensive and least transparent form of borrowing available.
Prioritise small and strategic suppliers. Some trusts operate informal or formal policies to protect small and medium-sized enterprises in the payment queue. These should be the norm, not the exception, and they should extend explicitly to the digital and innovation suppliers the government wants to encourage.
Be honest about the cost. Late payment is an off-balance-sheet liability in all but name. If the system is running a cash shortfall, that should be visible as a number, not hidden in the aggregate of thousands of delayed invoices. Transparency would improve policy and would let suppliers make better decisions.
None of this is a substitute for solving the underlying deficit. But it would stop the consequences of the deficit being quietly exported to the businesses that the NHS needs most.
A note on tone: this is a commercial relationship, not a grievance
It would be easy to read all of this as a complaint against the NHS, and some of it is. But it is worth remembering that the people in trust finance teams are mostly under enormous pressure, making difficult trade-offs between the payroll, the patients and the payables, with limited room to manoeuvre. Most would prefer to pay on time. Many are acutely aware of the damage that late payment does and are doing what they can within the constraints they face.
The most effective suppliers tend to treat payment as a shared problem to be managed rather than an injustice to be litigated. They know their customer's finance team, they understand the cash cycle of the trust, they invoice accurately, they chase politely and consistently, and they protect themselves commercially without making the relationship adversarial. They also recognise that the NHS remains, for most healthcare technology businesses, an enormously valuable customer with unmatched scale and genuine clinical impact. The aim is not to leave it; it is to engage on terms that are sustainable.
The bottom line
The fall in on-time NHS payments, from over 90 per cent in 2023/24 to under 88 per cent in 2025/26, with at least seven trusts paying fewer than half of their trade invoices within the period, is a signal worth taking seriously. It reflects budget deficits that have turned into cash constraints, and a system that is, in effect, funding part of its shortfall with supplier credit.
For healthcare technology suppliers, the implications are practical:
Check payment performance for every trust you sell to, and watch the trend.
Price and forecast realistically, assuming the actual rather than the contractual payment cycle where the two diverge.
Run tight credit control and make it easy to pay you.
Know your statutory rights and decide in advance how you will use them.
Negotiate structure, not just price, with milestones, deemed acceptance and mobilisation payments.
Finance the gap where it is economical to do so.
Diversify so no single slow payer can sink you.
Make the collective case through trade bodies and policy channels.
The broader point is one that policymakers would do well to absorb. A health service that wants to be a better customer for British technology and life sciences cannot also be a slow and unpredictable payer.
Procurement reform, digital frameworks and AI adoption all rest on a simple foundation: suppliers have to believe that if they deliver, they will be paid, and paid on time. Every month that the on-time figure slips, that belief is eroded, and with it the NHS's ability to attract the innovative suppliers it says it needs.
Until that changes, healthcare technology suppliers would be wise to assume the invoice is the new front line, and to manage it accordingly.
Nelson Advisors > European Healthcare Technology Investment Banking
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