Late payment regulations support SMEs
Large companies and limited liability partnerships (LLPs) will have to publish their payment practices and performance twice a year from April 2017.
This new reporting requirement will include the average time taken to pay supplier invoices.
The government hopes this will help to reduce late payments. It is estimated that SMEs are owed £26.3 billion in overdue payments.
Mike Cherry, national chairman at the Federation of Small Businesses, said:
“We estimate that if payments were made promptly, 50,000 business deaths could be avoided every year, adding £2.5 billion to the UK economy.
“It’s now crucial that these regulations are introduced and robustly enforced with proper sanctions put in place for any large business that tries to hide its payment practices.”
Combating late payments
Late payments can have negative consequences for a company’s cashflow and its ability to trade.
The new reporting regulations apply to large companies and LLPs if they exceed 2 or more of the following thresholds on their last 2 balance sheet dates:
- £36 million annual turnover
- £18 million balance sheet total
- 250 employees.
Failure to publish the payment report on time or accurately will be a criminal offence.
It is hoped that businesses are deterred from bad payment practices and increased transparency will help small businesses choose their larger business partners.
Small business minister Margot James said:
“Large businesses have an important role to play and the guidance published will help them fulfil their responsibilities and improve payment practices across the board.”
Talk to us about your cashflow today.
