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.
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.
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 two 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.
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.
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
We’re nominated for StartUps People’s Choice Award – Please vote to make us winners http://ow.ly/EHCw3058LiB #StartupsAwards #PeoplesChampion
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.
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!
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!
Many 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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…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).
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.