Since 6 April 2017 there has been a requirement on larger businesses to publish reports on their payment practices as set out in The Reporting on Payment Practices and Performance Regulations 2017 and The Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017.
The purpose of the Regulations is to force larger businesses (companies and LLPs) to be “named and shamed” if their payment practice, especially payments to SMEs, are not up to scratch.
The expectation being that in so doing payment practices country wide will improve and the flow of funds, especially to SME’s will accelerate thereby assisting cash flow. The duty to report on payment practices applies to companies and LLPs if, on their last two balance sheet dates, they have exceeded two or all of the thresholds for qualifying as a medium sized company under the Companies Act 2006, these thresholds are currently:
£36 million annual turnover
£18 million balance sheet total
The duty will not apply to a new company in its first financial year. Each relevant business is specifically required to publish on the government’s website the following information twice a year:-
- Standard payment terms, including any changes in payment terms in the last reporting period and whether suppliers have been consulted
- Average time taken to pay suppliers from the date of the invoice
Details of the proportion of invoices that have been paid:-
1.beyond the agreed terms o
2.within 30 days
3.between 31 and 60 days; and
4.over 60 days
- How much late payment interest has been paid and is due to be paid.
- The dispute resolution process for overdue invoices.
- Whether payments have been requested for suppliers to remain on an approved list.
- Whether the business operates e-invoicing, supply chain finance or holds an approved supplier list.
- Whether the business is a member of a payment code.
The directors/members are responsible for the reporting and failure to do so, or providing false or misleading information, is a criminal offence which may lead to a fine for the company/LLP or the director/member. Companies/LLPs caught by the reporting obligations will need to consider whether they are happy for the relevant information to be publically available and, if not, how this can be improved for subsequent reports.
At Brachers we provide a full business service providing advice on the drafting of payment terms, how to deal with payment terms offered by customers as well as the enforcement of such terms and obtaining payment of invoices for monies rightfully due and owing.