A new system to warn small companies about larger businesses which are notorious late payers is set to be introduced.
It comes as new research reveals that more than a third of payments owed to small West Midlands firms from larger customers are paid after 30 days.
The study suggests 34 per cent of invoices take longer than 30-day payment terms in this region, which is above the national average of 32 per cent, according to a report by Lloyds Banking Group in partnership with the UK Small Business Commissioner.
The West Midlands average sits at 40 days - three days more than the national average
and above Small Business Commissioner Paul Uppal's recommended exemplar of 30 days.
As a result of the research, Mr Uppal said he was recommending a new traffic light warning system to give small firms a signal about which large businesses pay their bills late.
The public data research analysed official payment reporting returns based on the annual reports of large businesses which is required by legislation that came into force in April 2017.
This new research sampled data from 7,010 companies and revealed that 65 per cent of large businesses have an average bill payment time of more than 30 days and 21 per cent of large businesses report an payment time of 50 days and above.
Companies in London are the most prompt, paying bills in 34 days, while those in Yorkshire and the Humber have the worst record, with payments taking 43 days.
Only 14 per cent of companies from the 7,010 analysed reported payment terms of 19 days or under, the report said.
The Commissioner said firms that were taking longer than 30 days to pay were, in effect, using their supply chain to finance their businesses.
Mr Uppal said: "The effect of late payment on small firms in the West Midlands can be devastating.
"It impedes business growth but also has an impact on the lives and mental health of those running small firms.
"There has been a requirement to report this information for nearly two years and some businesses have now made two reports.
"The challenge now is to use the information to help small firms make sound decisions based on transparent information before deciding which larger businesses they should trade with.
"A traffic light system would be a simple and effective way of demonstrating which larger firms have structured their supply chain in such a way that it is more than an exchange of good or services but also resembles part of their financing model."
Ed Thurman, managing director of global transaction banking at Lloyds Bank Commercial Banking, added: "We have discovered wide variations in payments depending on where businesses are located.
"For some businesses, two weeks can be critical in the financial well-being of a smaller businesses.
"Businesses could consider utilising invoice financing products to mitigate these challenges."