Wouldn’t it be great to know whether large businesses paid on time

As part of our Ask the Expert series, Karen Savage, Partner at law firm Shoosmiths, takes a look at the draft regulations for large companies to report their payment practices.


The regulations

With effect from 6 April 2017, draft regulations (Reporting on Payment Practices and Performance Regulations, 2017) would have large companies and LLPs publishing information about their payment practices and performance twice a year via a government website so that you can see who pays their bills on time. You will be a large company for these regulations if you tick two of the following three criteria: annual turnover of over £36 million; balance sheet total of over £18 million or over 250 employees.

Everyone will benefit from these regulations because you can see who does what, but if you tick two of the following three criteria: annual turnover of over £36 million; balance sheet total of over £18 million or over 250 employees, then you’ll need to be one of the ones who submits their data.

The reporting will include information about your payment terms, including your standard contractual length of time for payment of invoices, maximum contractual payment period and any changes to standard payment terms and whether suppliers have been notified or consulted about any such changes. You will also need to give information about your dispute resolution process related to payments.

Statistics will also feature in the report, and you will need to provide the average time taken to pay an invoice from the date of receipt of the invoice. This will include the percentage of invoices paid within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and lastly over 60 days. You will also need to confirm the proportion of invoices due within the reporting period which were not paid within the agreed terms.

There are a number of statements within the reporting requirements about whether you offer e-invoicing, supply chain finance and whether you are a member of a payment code. For example, the prompt payment code. You will need to state whether your practices and policies cover deducting sums from payments as a charge for remaining on a supplier’s list, and whether you have done this within the reporting period.

The report will need to be signed off by a director and so the intention is that this will be an issue at board level, and will therefore be a prominent consideration for those affected.

Guidance is expected at the same time as the regulations are placed before Parliament, and readers are welcome to monitor our publications for further updates.

Thoughts?

The aim of these regulations is to enable suppliers to identify which of their customers subject to the regulations are good payers. It will also provide information about payment terms and conditions which will allow suppliers to assess how their customers trade with their suppliers, and presumably whether they wish to offer their goods or services to that company.

Broadly, this is intended to be a tool for small business to tackle late payment, but there can be many reasons for late payment. The companies affected by these regulations will need to consider how they identify the risks from these regulations and manage those within their business, and in communications with suppliers. It may be, for example, that potential partners rule themselves out from a trading relationship with you before you even get the chance to dialogue with them.

Disputed invoices will be included within the statistics which record the proportion of invoices which were not paid within the agreed terms, and within the statistics on the average time taken to pay. This aspect might well need close examination within your business, and what impact if any, disputed invoices could have on your supplier base.

For those suppliers recovering unpaid invoices, this new regime will provide information which might assist with that debt recovery process. Depending on where the company is on the cycle of reporting, current information about their payment profile might assist you with your decision making in relation to debt recovery options.


About Karen Savage

Karen is a Partner and leads the recoveries team at Shoosmiths, a makor UK law firm. Karen has over twokarensavage decades experience in commercial recoveries and insolvency litigation, having acted for a broad range of clients within the financial sector, utilities, debt purchase , trade creditor and credit insurance sector.

Karen is recognised and ranked by Legal 500 and Chambers and known for her commerical and pragmatic advice, together with her exceptional client care skills. Karen is also a previous winner of Credit Todays Litigation Specialist of the Year


Disclaimer – This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

On this day … 26th October … Ormsby Street featured in Small Business Saturday

We’re proud to have been chosen by Small Business Saturday as one of their Small Biz 100, and 26th October is our featured day.

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We can add this to the list of historic things that have happened on this date, including:

1994 – Egypt and Jordan sign a peace deal to end 46 years of war

1992 – General Motors Corp. Chairman Robert Stempel resigned after the company recorded its highest losses in history

1959 – We see the far side of the moon for the first time

1949 – U.S. President Harry Truman raised the minimum wage from 40 to 75 cents an hour.

1947 – Future US President (?) Hilary Clinton was born

1942 – British actor Bob Hoskins was born

1916 – Former French President Francois Mitterand was born

1881 – The “Gunfight at the OK Corral” took place in Tombstone, AZ. The fight was between Wyatt Earp, his two brothers and Doc Holiday and the Ike Clanton Gang

Small Business Saturday UK is a grassroots, non-commercial campaign, which highlights small business success and encourages consumers to ‘shop local’ and support small businesses in their communities.

The day itself takes place on the first Saturday in December each year, but the campaign aims to have a lasting impact on small businesses. In 2016 Small Business Saturday will take place on Saturday, December 3rd

Campaigning for your local business – why bother?

Checking LinkedIn today I saw a post about a coffee shop in Bristol which was suffering because of works that the council were undertaking on a nearby bridge which was directing customers away from the cafe.

Crepe & the Coffee Cabin

I used to work with a customer who had an office just across the water from their location, and it came to my attention from a member of the customer team I worked with.

It’s a great example of the challenges that small businesses face on a daily basis.  You think you’ve got your business plan all sorted and then something unexpected happens and you’re up against the wall.  In this case it’s important local infrastructure works, but many times it’s one invoice that’s not been paid because of a problem down the supply chain.

But in this instance the joys of social media have taken over and the cafe is gaining important attention which is driving some people for a latte or a crepe.  One person’s desire to help has proven to make a difference.

There are thousands of businesses across the country experiencing similar problems, so if there’s one you know that needs a helping hand, then help them out.  It doesn’t need to take a lot of effort but could make a lot of difference.

You’ll miss them when they’re gone!

 

 

Invoice early in holiday season or you’ll get burned

CreditHQ

Most small business owners get told that it doesn’t matter if they have a good idea or great service but what really matters is that they have an effective cash flow or else they won’t survive. And it’s true, cash flow is the lifeblood of any business, and as such we should do everything we can to ensure the flow keeps flowing.  However we’re soon to be entering the season when folks disappear off to the seaside which means they aren’t signing off invoices. It’s holiday season!

HolidaysMany businesses will have reduced staffing levels during the holiday period, which means your customers won’t be paying any of their bills. In the meantime, you’ll need to be paying your employees holiday pay and not getting in any more new business as your team also head off to get a tan.

There are however a few simple things you can do in order…

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People don’t buy what you do…

…they buy why you do it.

That’s what Simon Sinek argues in his powerful TED talk and it’s hard to disagree.

I witnessed this firsthand when on our Easter break at Croyde Bay (a beautiful part of the world that I recommend visiting, by the way).

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Down by the beach, in a surf shop we met a lady who was running her own small jewellery business.

There’s nothing remarkable about someone making and selling jewellery; granted. However, this lady was making exquisite pieces of jewellery from pieces of glass and pottery that had all been sourced from Croyde beach.

Now, people love Croyde. They just do. You come away wishing you could take a part of it with you and that is why this lady was doing what she was doing. She wanted to make it possible to take a piece of the place you love away with you, in the form of a beautiful piece of jewellery.

Like many others, we were in.

We bought why she was doing it and my wife left with a very pretty  green “sea glass” ring.

If you’d like a piece of Croyde, check out Croyde Sea Glass on Etsy or Instagram.

Late payment threatens to derail the freelance industry

UK freelancers are increasingly struggling with late invoice payments, with around half admitting they have considered quitting life as a freelancer because of worries over continued late payment, and 46% stressing about having enough cash to live on.

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Our latest research here at Ormsby Street, also reveals that one in ten freelancers have faced difficulties paying their mortgage or rent because of late invoice payment, and many have turned to family (37%) or even payday loans companies (36%) to cover a shortfall brought about by late payment.

While a fortunate 19% of respondents say most of their invoices are always paid on time, a freelancer’s invoices are paid on average 18 and a half days after their due date. At any one time, a freelancer in the UK is owed on average £5,431.03 in late payments and 79% of freelancers say that cash-flow is the number one concern for their business.

“Every freelancer knows that late invoice payment is one of the biggest frustrations, impacting cash-flow and causing much stress, from paying the mortgage to having enough money to live on,” said Martin Campbell, Managing Director, Ormsby Street. “For a freelancer to be owed more than £5,000 is clearly unacceptable and threatens the emerging freelance economy in the UK, which brings flexibility and work / life balance to so many.” 

The Office for National Statistics revealed in 2015 that 4.55 million Britons are now their own boss and research by the Association of Independent Professionals and the Self-Employed (IPSE) found three in five businesses agree that it would be difficult to operate without hiring freelancers. The Ormsby Street survey of 1,002 freelancers and sole-traders, revealed that 40% of respondents have taken out a County Court Judgement (CCJ) in the last year to chase a bad debt, and more than half say that late invoice payment is getting worse not better.

It remains a problem for many freelancers when it comes to chasing clients over late payment, partly because they do not have the time to spare, but also because of fears this might impact future work with that company.  57% of respondents say they worry that if they chase for payment that client might not use their services again, while two-thirds say they feel uncomfortable and awkward chasing clients for late payment.

“Why should a freelancer waste their own billable hours chasing payment for work that has been successfully completed and is already due for payment,” continued Martin Campbell. “If customers are not willing to pay within the agreed terms then it’s time for freelancers to become more informed over whom they work with, and either ask for payment upfront or even choose to not work with company.”

Special Freelancer rate!

With 49% of freelancers having had to turn down a contract because of concerns over a client’s ability / willingness to pay on time, we’re offering access to CreditHQ for the special freelancer rate of £12.50 for the standard subscription; allowing freelancers to obtain financial insight into every company they trade with. Sign up here to take advantage of this offer

“Freelancing has grown in popularity because of the choice and flexibility it gives people over their career, but its success relies on the prompt payment of invoices, which is not happening enough,” concluded Martin Campbell. “Credit-checking potential customers and partners is straightforward to do and should be done by a freelancer every time they work with someone, to protect themselves against late payment.”

About the research

An online survey of 1,003 freelancers and sole-traders was undertaken by TLF Research in March and April 2016.

CreditHQ, the credit-checking tool built by Ormsby Street, collates credit and trade information from Companies House, Experian and Dun & Bradstreet and presents that information in simple-to-understand credit and payment indicators, so a freelancer can assess which businesses are likely to pay them on time, or after 30 or more days.

Formed in 2014 to take over the operation of the financial data proposition of BCSG, Ormsby Street is developing the next generation of financial data services for small businesses. Its team of high-performing product innovators and software engineers are quietly taking sophisticated financial information and turning it into a next-generation digital tool to help businesses make good decisions about customers, suppliers and themselves.