Officials from the Cabinet Office have written to firms to remind them of the new rules on prompt payment, which come into force this autumn.
Minister for Implementation, Oliver Dowden, said: “Prompt payment is critical for all companies helping to deliver public services, particularly small businesses which are the backbone of our economy.
“That’s why, from September, if government contractors are late with supplier payments, they could be prevented from winning public contracts until they clean up their act.”
Under the new rules, suppliers who bid for government contracts above £5m per annum, who cannot show they are paying 95% of invoices within 60 days, risk being prevented from securing government contracts.
The new measures follow further moves to level the playing field for small businesses, including an ambition to pay 90% of the government’s undisputed invoices from SMEs within five days.
Suppliers that are not being paid on time are also able to raise complaints and concerns directly to the government through the Public Procurement Review Service.