In finance circles, the words ‘Duty to Report’ are likely to be some of the most used in 2017 thanks to recent legislation on the reporting of payment practices and performance regulations, which came into force on 1 April this year.
The regulations require businesses to report on the time it takes them to pay their suppliers and the intention is to tackle the problem of late payments – it’s estimated that the 5.5 million SMBs in the UK are owed £26.3 billion in late payments, something the government has called “completely unacceptable”. The information will be publically available so the worst offenders can be ‘named and shamed’.
Not all businesses will need to report and we looked at whether your business is one of the ones who will in Reporting for duty, sir. (In essence, if you’re a limited or limited liability company that’s over a year old and ticks two out of the three boxes of a turnover of £36 million, a balance sheet of £80 million and 250 or more employees, you will).
If you are one of the businesses that will need to report, read on to find out about the detail of the new requirements – and how you can make sure your business isn’t one of the ones who come under the spotlight for all the wrong reasons.
What information needs to be submitted?
The information that the government requires can be broken down into two areas:
- Narrative information
- Statistical information
Narrative information is wide ranging and covers the average time it takes you to pay your suppliers, your standard payment terms and your dispute resolution facilities amongst other things.
Statistical information covers the percentage of invoices paid late, the percentage of invoices paid within 30 days, the percentage of invoices paid within 60 days and the percentage of invoices paid later than 60 days.
What do you need to be doing now?
If you aren’t already planning for your first submission, now’s the time to assess the situation and put actions into place to address any areas where you’re likely to fall short.
The first step is to fully understand all the information you need to report. A great place to start is this cheat sheet, prepared for us by one of our customers, law firm Stevens & Bolton LLP. Full details are also available on the gov.uk website.
Once you know what you need to report, the next step is to get a high level understanding of how you stack up. An internal meeting or an internal audit will help you to do this. When you know the areas where you’re weak, you are in a position to start to address the problems.
If you find that your processes are letting you down, our experience is that automation has a huge role to play in helping to solve bottlenecks and streamlining the invoice payment journey. It’s a solution that helps you meet the requirements of the new legislation but it also brings much wider benefits. In research conducted for us in 2015, 44% businesses who had implemented invoice automation reported reduced operating costs, 43% reduced administration time and 38% increased productivity in the finance department.
The take-away message?
If your business isn’t paying its suppliers as quickly as you would like, the Duty to Report legislation is best seen as a valuable opportunity to ‘get your house in order’. Get to grips with the reporting requirements and then get to grips with what you’ll need to put in place to submit model answers.
For more information
If you would like to understand more about Duty to Report, you might like this discussion between Concur regional director Steve Roberts and journalist Tom Herbert of AccountingWEB.
You can also access an on-demand webinar with Concur and SAP: New Duty to Report Laws: How will it impact your business?