The government has set out measures to increase transparency of payment practices to support SMEs.
From April 2017 large businesses will have to publish details of the average time taken to pay supplier’s invoices. These new measures aim to increase transparency and help small businesses make informed decisions about who they do business with.
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.
Coming into force in April 2017, this ‘duty to report’ will require large companies and limited liability partnerships (LLPs) to publicly report twice yearly on their payment practices and performance. It is hoped that this will put a spotlight on bad practice and lead to improved standards.
The 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.
Small Business Minister Margot James said “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.”
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.”