Large Businesses: It will be your duty to report on payment practices and performance
The government is looking to impose a duty on large businesses to report on their financial practices, policies and performance.
The regulations are proposed to come into force on 6 April 2017. This will be achieved by a new regulation drafted by the Department for Business, Energy and Industrial Strategy with the aim of helping small businesses and their cash flow.
Late payments can harm cash flow and in the case of small businesses and in extreme circumstances a delay in payment can cause insolvency. The regulations look to improve transparency of payment practices for large companies and LLPs. Poor payment records will be highlighted and encouraged to improve and positive practices will be highlighted.
Only large companies and LLPs will be required to publish the data about their payment practices. To qualify as such a business, it will have to achieve two or more of the following thresholds:
- an annual turnover of more than £36 million;
- a balance sheet with a total of over £18 million; and/or
- at least over 250 employees.
Information such as the average time taken to pay invoices, percentage of invoices paid in 30 or fewer days, between 31 and 60 days, and over 60 days will have to be disclosed. These figures will be submitted on a web service, which is currently being developed. It is hoped that this will be user friendly, accessible and offer easy upload and search options.
Failure to report or publishing misleading data may be a criminal offence and the company and directors liable to a fine on summary conviction. All directors will be accountable unless they can show they took all reasonable steps to ensure the requirement would be met. Additionally a director will have to approve the report to ensure accuracy of information.
The government is active in this area and is also working to establish the Small Business Commissioner, which will not only enable small businesses to resolve disputes and avoid future issues through general advice and information but also consider complaints by small business suppliers about payment issues with larger businesses.