In January the UK government published an Act called “Duty to Report on Payment Practices and Performance” which came into law on 4th April combined with a strengthening of the code of practice called the Prompt Payment Code.
Informita, a leading working capital management consultancy in the UK, conducted a survey of UK corporates and found that “77% of responders were not aware of the existence of the regulations at all. Only 15% understood the content of the new regulation. Only 8% were aware that not complying with the new regulations would be a criminal offence. But only 8% thought that they might need help to comply.”
Informita’s newsletter on the Payables Reporting requirements summarises the position:
“All companies with an annual turnover of more than £36 million, a balance sheet total of more than £18 million or have more than 250 employees will have to comply with the new regulations. This includes UK subsidiaries of foreign parent companies. The following information will need to be published every six months for all supplier payments under a UK contract (excluding financial services):
- The company’s standard payment term and any changes to the standard payment term in the previous six months. If no standard payment term exists then the most prevalent term must be reported
- The maximum payment term agreed with a supplier
- The average time taken to pay supplier invoices
- The proportion of invoices paid beyond agreed terms
- The proportion of invoices paid in 30 days or less, paid between 31 to 60 days and paid beyond 60 days
- The amount of late payment interest owed and paid to suppliers
- The dispute resolution processes must be explained
- It must be disclosed if there is the availability of e-invoicing, supply chain finance or preferred supplier lists
- Whether financial incentives were required to join or remain on supplier lists
- Whether the company is a member of a Payment Code.
Prompt payment code
The Prompt Payment Code has also been revised. In order to comply with the code in the future the following new rules will apply:
- Pay invoices within a maximum of 60 days, and seek to pay within 30 days as the norm
- Avoid practices that are grossly unfair and adversely affect your suppliers
- Report annually (for small and medium sized companies) on payment performance, on a comply or explain basis, and every six months for large companies in line with the new statutory reporting requirement.
Legislation could have been better
Brian Shanahan, Informita’s CEO, finishes the newsheet with a plea for clearer and more effective legislation. And, sadly, he ends with, “So let’s congratulate the latest bunch of politicians for creating more work for everyone without solving any problem.”
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