Payment reporting regulations
Following months of setbacks and delays, the government’s new payment reporting regulations are at long last set to come into force. The measures will force large businesses to report on their payment practices and performance in a bid to increase transparency for suppliers and encourage the worst offenders to clean up their act. But what else do we know about the regulations? Here, Hilton-Baird Collections () explains what they mean, who they apply to and what happens if businesses don’t comply:
The regulations affect any company or LLP that meets two or more of the following criteria on each of their last two balance sheet dates:
Annual turnover is more than £36 million
Balance sheet total is over £18 million
Over 250 employees on average
These large businesses will now have to report on their payment practices on a twice yearly basis, within 30 days of the end of each reporting period.
Each reporting measurement is hoped to give suppliers more insight into the businesses they are considering selling to. As the issue of late payment has worsened over the past few years, much of the spotlight has been shone on the payment practices of the UK’s largest businesses.
‘Supply chain bullying’ is a phrase that has often been used to describe businesses imposing their own longer payment terms on smaller suppliers, knowing that those suppliers rely on their custom. However, with some waiting as long as 90 or 120 days for payment, it is having a major impact on cash flow and putting many businesses on the brink.
For large companies and LLPs who fail to comply with the regulations face penalties. It will be classed as a criminal offence for the company and directors should any qualifying business breach the reporting requirements, whether they fail to publish the report on time or they do so in a misleading, false or deceptive manner. Will it make a difference? Only time will tell. Unfortunately, many small businesses feel as though they cannot refuse orders from large businesses due to the value of the contract to the company, and the prestige of being associated with such a big brand. Whether or not knowing about a customer’s poor payment practices will encourage them to say ‘no’ remains to be seen, but hopefully it will serve as an incentive for these larger companies to clean up their acts and start paying their invoices sooner – and on time.