New payment reporting rules 'a boost to small firms'

Published:  05 December, 2016

New measures being set out by government will force large businesses to publish details on their payment practices, in a move that BEIS says will tackle the issue of late payments to small firms.

Under draft regulations released by Small Business Minister Margot James, large companies will be required to publish details on how quickly they pay their suppliers from April 2017. This 'Duty to Report' will require large companies and limited liability partnerships (LLPs) to publically report twice yearly on their payment practices and performance, including the average time taken to pay supplier invoices. This, Ms James said, will put a spotlight on bad practice and lead to improved standards.

As of June 2015, the overall level of late payment owed to small- and medium-sized businesses was reported as £26.8 billion. A recent survey from the Federation of Small Businesses said that, on average, 30% of payments are received late. It is claimed the draft measures announced will help small businesses make informed decisions about who they do business with.

Government will publish guidance on how to comply with the Duty to Report early next year, to help large businesses prepare for the new reporting requirements.

Minister Margot James said: "Unfair payment practices and unnecessary red tape hamper [small business'] ability to grow and have no place in an economy that works for all. By shining a light on how large businesses pay their smaller suppliers, we want to empower small businesses and drive a real change in payment culture. I want to thank the individuals and business groups who have responded to the consultation and helped shape this policy."

Mike Cherry, national chairman of the Federation of Small Businesses, said: "Tackling late payments is now a key part of the government's Corporate Governance agenda. The comprehensive and regular duty to report is the first step to combat a business culture that feels like one where it is OK to pay small firms late. It is not OK - we estimate that 50,000 business deaths could be avoided every year, if only payments were made promptly – adding £2.5 billion to the UK economy. We need to see executive board level engagement and scrutiny of payment practices to deliver lasting cultural change."

The Duty to Report requirement is part of a package of government measures to tackle the issue of late payment. This includes the appointment of the Small Business Commissioner, who from Autumn 2017 will support small businesses in resolving payment disputes.

Further details on the late payment policy can be found online in a government response to a consultation on the Duty to Report on Payment Practices and Performance: https://www.gov.uk/government/consultations/business-payment-practices-and-policies-duty-to-report

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