Payment Practices & Performance Reporting

Who is caught by the new rules?

All companies and LLPs that have exceeded two of the three size criteria on their last two balance sheet dates will need to make twice annual reports via a government portal. No company will be required to report in their first year of trade. The thresholds are those of a ‘large’ company, these are:

• Annual turnover > £36 million;
• Balance sheet total > £18 million; and
• Number of employees > 250.

For companies in a corporate group, a two-step test applies:

• Does the parent company qualify as large?
• Does the wider group qualify as large?

If the answer to both questions is yes, all group companies shall be required to publish their own reports. Parent companies cannot publish a collective group report.

What needs to be reported?

Businesses in scope of the reporting requirement must prepare and publish information about their payment practices and performance in relation to qualifying contracts annually. The information for each reporting period must reflect the policies and practices which have applied during that period.

A qualifying contract is one which satisfies the following:

• It is between two, or more, businesses;
• It is sufficiently linked to the UK;
• It is for goods, services or intangible property, including IP; and
• It is not for financial services.

Financial services businesses are not excluded from this reporting; they will only report on contracts that do not relate to financial services such as office supplies.

Contracts “sufficiently linked” to the UK will be covered by the duty to report, it is likely that contracts with non-UK suppliers will require detailed consideration to evaluate the individual circumstances.

How should it be reported?

The BEIS has stated that the reporting consists of three different elements: narrative description, statistics, and tick-box statements. The BEIS operates a central online portal for the reporting.

For each reporting period and for qualifying contracts, businesses are required to report on the following:

Narrative descriptions:

• The business’ standard payment terms, which must include
  • The standard contractual length of time for payment of invoices.
  • Maximum contractual payment period and any changes to the standard payment terms in the reporting period.
  • How suppliers have been notified or consulted on these changes.

•  The business’ process for payment dispute resolution.

Statistics on:

• The average number of days taken to make payments in the reporting period, from the date of receipt of invoice or other notice.
• The percentage of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and 61 days or longer.
• The percentage of payments due within the reporting period which were not paid within the agreed payment period.

Statements regarding:

• Whether suppliers are offered e-invoicing.
• Whether supply chain finance is available to suppliers.
• Whether the business’ 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.
• Whether the business is a member of a payment code, and the name of the code.

When should it be reported?

Reporting is due within 30 days of each six-month period and is aligned with the business’ financial reporting dates. We have outlined example reporting periods below. 

How we can help

• Whether or not you will be required to report.
• Reviewing or preparing your payment practices reporting.
• Establishing systems and/or processes to collect the data and ensuring these are complete.
• Reviewing and improving processes that feed into this reporting, such as the procure-to-pay process.
• Building and developing automated management information systems to link payment practices reporting with other systems.

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