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Large companies have a number of different responsibilities and payment regulations that they must conform to, so it’s important to inform yourself about these. In April 2017, the UK government introduced legislation that requires large companies and Limited Liability Practices to report on their payment practices, policies and performances every 6 months. This process is known as payment practices reporting.
Payment reporting was introduced in an attempt to reduce late payments, since these can have a detrimental effect on small businesses and even drive them to bankruptcy. Keep reading to find out all about these regulations and how you can ensure that you comply.
Who has to do payment practice reporting?
There are several factors that influence whether your company is obliged to do payment practice reporting. Any business that exceeds at least two of the following thresholds will be required to do so:
Over £36 million in annual turnover
Over £18 million in balance sheet total
Over 250 employees
What needs to be covered for UK payment practices reporting?
Twice a year, any large business that satisfies the above criteria will be required to complete a full report on their payments. This means that they must publish certain information about their payment practices and performance in relation to certain contracts.
In terms of statistics, UK payment practices reporting should include the following figures:
The percentage of payments that were made in under 30 days, those made between 31 and 60 days, and those that took 61 days or longer.
The average number of days taken to make a payment to suppliers, calculated in relation to the date of receipt of invoice or any other notice of the requirement to make a payment.
The percentage of payments that were not paid within the agreed terms.
In addition to this, the company should also give a statement that expresses their standard contractual length for payment of invoices, as well as the maximum possible contractual period for payment. If they have had any changes to this standard format within the reporting period, they should explain how the suppliers were notified or consulted about this.
Finally, the report should cover various information about how the company deals with suppliers. This includes whether they are offered online invoicing and what financing options are made available to them. Also, the report should state whether the company deducts sums from payments to charge suppliers for remaining on the list, and whether the business is a member of any payment codes.
When and how should I do payment practices reporting?
The payment practices reporting website is easy to access through the gov.uk portal and provides a simple, convenient way for you to declare all of your payment data. You will be provided with two reporting periods throughout the year, and your payment reporting should be completed within 30 days of the reporting period. As soon as you publish this information, suppliers and NGOs will be able to access it.
How can I prepare for payment reporting?
By making this information public, the government expects to make businesses more accountable and therefore put in measures to improve their payment processes. To ensure that you comply, you can consider taking these steps:
Conduct a gap analysis to establish the procedures you already have in place and how they are used.
Identify common areas for failed payments and assess if there are any additional measures that you could introduce to avoid these. For example, if invoices are often processed late, you could introduce software to automate this.
Produce an improvement plan that can be tracked. This may focus on how long it takes for invoices to be processed, or perhaps the time elapsed between invoicing and payment, for example.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.