Large companies will soon be subject to additional reporting regulations in their dealings with small businesses.
This measure forms part of the government's drive to help small organisations tackle late and poor payment practices they may face when dealing with large organisations.
Reporting obligations
From April 2016, large companies will be required to report on their payment practices and policies twice a year.
An indicative format for the report has been published by the government which highlights the type of information that large organisations will be required to report on, including:
- standard payment terms, including any changes to these in the last reporting period
- the average time taken to pay invoices
- the proportion of invoices paid beyond agreed terms
- the proportion of invoices paid in 30 days or less, paid between 31-60 days and paid beyond 60 days
- the amount of late payment interest owed and paid
- whether financial incentives were required to join or remain on supplier lists
- the availability of e-invoicing, supply chain finance and preferred supplier lists
- dispute resolution processes
- membership of a payment code
It is expected that large organisations will be required to publish the reports on their websites.
The purpose of publishing such reports is to increase transparency and comparability in the payment practices of large organisations. The publication of this information will also highlight those businesses with good payment practices whilst raising awareness of those whose payment practices are poor.
Impact
At present, it is anticipated that the reporting regulations will apply to large private companies, large LLPs and large quoted companies. However, until the regulations are published, the full extent of the proposals and their impact on the organisations that will be caught by them are unknown.
The government has indicated that these companies will be required to report on their payment practices and policies from April 2016.
Given such a short timescale to proposed implementation, large organisations should be keeping abreast of developments in this area and looking at their own payment practices which may soon be in the spotlight.
It is clear from the measures being introduced that the government is set on tackling what it perceives as late and poor payment practices and large organisations should be preparing for this extra level of scrutiny in their dealings with small businesses.