The government has ordered all large businesses to disclose information on payment practices as it seeks to crackdown on late payment culture. From April, all enterprises which meet the qualifying criteria face a statutory Duty to Report information including the average time taken to pay invoices and details of payment dispute protocols.
The reports, which must be submitted twice a year, will be published online, giving suppliers access to critical information on the payment practices of potential larger clients.
Name and Shame
Announced in Parliament by small business minister Margot James, the new regulations follow through on a government promise to ‘name and shame’ big companies which habitually delay payments to SME suppliers.
In a statement accompanying the announcement, 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.
“Large businesses have an important role to play and the guidance published today will help them fulfil their responsibilities and improve payment practices across the board.”
The new rules are backed in legislation by the Small Business Act 2015, which comes into full effect this year. Qualifying businesses will face criminal sanctions if they refuse to comply with the regulations.
Businesses must submit reports if they meet two out of three qualifying criteria - an annual turnover of £36m or more, a balance sheet or £18m or more, or they employ more than 250 people.
Content continues below
It can’t be too often that small suppliers find themselves in agreement with notoriously hard-nosed retail tycoon Mike Ashley, owner of the Sports Direct Group. But on the subject of troubled…
We recently blogged about Crowdmix, the London-based start-up that went into administration. It’s a sad fact that many businesses fail within their first year. This can’t always be prevented:…
The world of credit control brings to mind the infamous Donald Rumsfeld quote: "There are known knowns; there are things we know that we know. There are known unknowns; that is to say, there are…
Many small to medium-sized enterprises (SMEs) across the UK are effectively being forced to loan money to large firms interest-free, according to the Federation of Small Businesses. In one of a pair…
For small suppliers, the fact that details of all reports will be publicly available is a huge boost in the battle against unfair payment practices. Reporting companies will have to submit required information via an online portal and details will then be published online within 30 days.
This will be an invaluable tool for small suppliers when making decisions about who to do business with. Each report will have to provide figures on the percentage of invoices paid within 30 days, the percentage paid between 31 and 60 days, and the average time taken to settle invoices.
Suppliers will therefore have clear evidence about which firms employ good practices and which do not. Over time, the reputational impact of this information being publicly available will hopefully encourage those with poor records to amend their ways.
The reports will also oblige qualifying companies to report full details of payment terms as well as processes for handling disputes. Again, this will mean suppliers are better informed when it comes to entering negotiations and making decisions.
The details required on payment terms and practices cover some key positives and negatives for small businesses. On the positive side, businesses will have to report if they offer flexible options such as e-invoicing and supply chain finance. On the negative, companies will be forced to reveal if the levy a charge for remaining on a supplier list, and whether this is deducted from invoices automatically.
With more than 30 years in the business, Safe Collections is proud of our track record helping small businesses when client payments become a problem. If you would like further advice on your rights regarding late payments, or if you are looking for assistance with debt recovery and credit control, please contact us here.
Over 150 Years Of Industry Experience
Our modest but highly skilled team has a combined total of over 150 years of experience in commercial credit management and B2B debt collection. From independent IT contractors to major film and TV publishers, Safe Collections has the knowledge and experience you need to get paid quickly and cost effectively.
Image Pelican late Payment Reminder by wsssst is licensed under CC BY 2.0