Croydon Council has become the first London borough to offer suppliers faster payments in return for a rebate.
The town hall will offer firms the chance of being paid quicker in return for a small payment to the town hall, which will be calculated using the number of days the invoice payment is accelerated.
However local suppliers will be invited to join the programme without the deduction of a rebate.
While Barnsley MBC in Yorkshire has already adopted a similar scheme, the launch in Croydon is thought to be London’s first.
The borough said it would help improve cash flow for businesses while generating income for the town hall.
Cllr Simon Hall, cabinet member for finance and treasury, said: ‘This new programme achieves two major benefits. It helps Croydon businesses and supports the local economy, while also generating an income to the council which can be reinvested in delivering our most important services to residents.
‘It is a great opportunity for us to be more efficient, and more effective, while setting us apart from other London boroughs as leaders in innovation.’