Ministry of Defence officials have been left red-faced after the implementation of a new system designed to make sure that suppliers are paid on time left some firms missing out for up to three months.
The MoD launched the new system to make business with the department more efficient as part of a cross government bid to stamp out late payment to small firms, with switchover beginning in early December.
However, its implementation left firms including Britain's biggest defence supplier BAE Systems protesting over delayed payments, with BAE chief executive Ian King writing directly to officials.
It comes as the government continues a crusade on late payments, with small business minister Margot James last month launching new guidance to help private sector firms.
Announcing the guidance in January, James said: “It’s completely unacceptable that small and medium-sized businesses are owed £26.3bn in late payments, which hampers their ability to grow and has no place in an economy that works for all.”
The MoD has insisted it is working to resolve the problem, adding that late payments sometimes occurred because of efforts to stamp out fraud.
An MoD spokesman said: “Since the new system was implemented in December 2016, the MoD has paid over £7bn to suppliers, with nearly half a million invoices processed and we are dealing with the last few.
“Small and medium-sized enterprises are a key part of the defence supply chain and we are committed to ensuring that we continue to support their important work.”