Payment practices and performance reporting

Effective from April 2017, all large UK companies now have a duty to report publicly on their payment policies, practices and performance.

The UK government has for some time voiced concerns about the administrative and financial burdens faced by thousands of companies because they are not paid on time.

This new requirement, launched by the Department for Business, Energy and Industrial Strategy (BEIS), will need careful consideration, both to ensure compliance and also manage the likely public scrutiny.

Our Assurance, Data and Working Capital experts are well-placed to help you successfully navigate the new regulations.

Who will it affect?

Broadly, it will impact any companies and LLPs that exceed at least two of the following three thresholds in the last two preceding financial years:

£36m annual turnover
£18m balance sheet total
250 employees.

The reports have to be produced per entity meeting the thresholds (i.e. not on a group basis) and need to be signed off by a director of that entity. There is no requirement for external audit but directors could be fined if the reporting is late or incorrect.

When does it come into effect?

The government website for report submissions can be viewed by the public. The regulation applies to financial years beginning on or after 6 April 2017.

Reporting is due within 30 days of each six month period and will be aligned with the business’s key financial reporting dates, i.e. the first report will be due 30 days after the end of the first six months of a business’ financial year, and the second reporting period will end at the same time as the business’s financial year, with the report due 30 days afterwards.

For example, first submissions for companies with a December year-end will become due on July 2018. Companies with an April year end will have to report as early as 30 November 2017.

Effective from April 2017, all large UK companies now have a duty to report publicly on their payment policies, practices and performance.

First submissions for companies with a December year-end will become due on July 2018. Companies with an April year end will have to report as early as 30 November 2017.

What needs to be reported?

The reporting covers payment policies, practices and performance relating to contracts between two (or more) businesses that have a significant connection with the UK. The contracts must be for: goods, services or intangible property, including intellectual property, but excludes contracts for financial services. Information needed is as follows:

Statistics

1. The average number of days taken to make payments to suppliers in the reporting period, from the date of receipt of invoice or other notice

2. The percentage of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer

3. The percentage of payments due within the reporting period which were not paid within agreed terms.

Narrative

1. The business’s standard payment terms, which must include:

the standard contractual length of time for payment of invoices
maximum contractual payment period
any changes to the standard payment terms in the reporting period, and how suppliers have been notified or consulted on these changes.

2. The business’s process for resolving disputes related to payment.

Statements

1. Whether suppliers are offered e-invoicing

2. Whether supply chain finance is available to suppliers

3. Whether the business’s practices and policies cover deducting sums from payments as a charge for remaining on a supplier’s list, and whether they have done this in the reporting period

4. Whether the business is a member of a payment code, and the name of the code.

How we can help

Provide guidance and assurance over reporting
Assist with setting up the reporting
Benchmark and improve your working capital effectiveness

Provide guidance and assurance over reporting

We can provide guidance on how to implement the reporting
Assist in interpretation of the requirements and how they apply to your organisation
Review your reporting set up and outputs
Provide assurance that your reporting is accurate and adequate.

Assist with setting up the reporting

We can assist with reporting design
Support setting up data extraction from systems
Automating the process
Define reporting methodology and activities
Document procedures
Assist in defining reporting controls.

Benchmark and improve your working capital effectiveness

Review payment policies and processes, identify potential process improvement and advise on terms standardisation
Provide benchmarking of payment performance and working capital metrics
Support with the contextualisation of the payment practice and performance statistics of the reporting company.