Small Business Minister Margot James has this week outlined guidance for large businesses to report their payment practices – prompting a collective sigh of relief across the squeezed SME community.
The Government’s ‘duty to report’ guidance will come into effect on the 6th April and will mean that large companies and limited liability partnerships (LLPs) will be under obligation to publish their payment practices and performance twice a year.
A major positive for this is how it can affect small businesses.
The Government has outlined that all reports submitted will be openly available to SMEs “on a web-based service provided by or on behalf of government within 30 days of the end of the reporting period”. This means that small business owners will be able to view a company’s reputation and how it pays its suppliers, importantly, allowing them to steer clear of serial late payers. Firms will also have to publish the average time it takes to pay its invoices; piling on even more pressure to keep the average time down and late payments to a minimum.
So who falls within this regulation? Companies that tick two of the following factors will have to play by the new rules:
- £36m annual turnover
- £18m balance sheet total
- 250 employees
Click here to see how Concur can help your business get you invoice process up to scratch.
Sounds great, right? Well it gets better. The Government has created a further layer of protection to ensure that the initiative is not simply ignored. It will be a criminal offence if you fail to report your payment practices and companies could face fines or worse.
Late payments have been a scourge of the UK economy for far too long, according to Dafydd Llewellyn, MD for UK SMN at Concur. He argues that it is great to see the Government taking forceful action on the subject, helping small businesses that have for too-long been held back by bigger firms failing to pay their invoices on time.
Chris Baker, MD for UK Enterprise at Concur added that for large enterprises, it’s the kick-start needed to get their shops in order. Many firms acknowledge that their invoice process could be smoother. Now their reputation is on the line and if they fail to improve, the country will know about it.
For a full write-up on the topic see AccountingWEB, which also provides a helpful outline of the full requirements of the legislation, listed below:
- Descriptions of the business’s payment terms
- The business’s process for dispute resolution related to payment
- Statistics on the average time taken to pay invoices (from the date of receipt of invoice)
- The percentage of invoices paid within the reporting period
- The proportion of invoices due within the reporting period which were not paid within agreed terms
- If the business offers e-invoicing
- If the business’s offers supply chain finance
- If the business’s practices and policies cover deducting sums from payments as a charge for remaining on a supplier’s list, and whether they have done this in the reporting period
- If the business is a member of a payment code, and the name of the code