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Focus on large companies that don’t pay their suppliers on time

23 November 2016

The Small Business, Enterprise and Employment Act 2015 has received a fair amount of media attention as it introduces many changes on how companies are run. There is however one section of the Act which has received far less press coverage and commentary.

Section 3 gives the Secretary of State the power to require certain companies to publish information about their payment practices, policies and performance.

Late payment is a problem for the UK economy, particularly for small businesses which tend to be hit the hardest. Late payment can seriously damage the health of the business by preventing its natural growth or even leading it into liquidation. The government would like to see larger companies lead by example by paying their suppliers promptly and fairly and it hopes that these regulations will encourage them to do so through public exposure.

Section 3 came into force on 26th May 2015 and although the regulations to be made under it were due to be implemented in October 2016 this has been delayed until April 2017.

When they go live the regulations are expected to apply to large companies, large LLPs and all quoted companies.  They will be required to report every six months on (amongst other matters) the following:

  • standard payment terms
  • average time taken to pay
  • proportion of invoices paid beyond agreed terms
  • proportion of invoices paid within 30 days, between 31 and 60 days and later than 60 days.

Companies that are likely to be caught by these new regulations should start thinking about putting systems in place to ensure that they can comply with this new reporting requirement. It will be interesting to see whether the payment performance of large companies improves as a result.

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