08 Mar 2017 Urgent action is required by UK business to prepare for the new payment practice and performance rules
Recent UK legislation could have a damaging effect on many British businesses if they are not sufficiently prepared. From April 2017, many UK based business are required to publish statistics showing how they pay suppliers. If they are seen to be routinely paying suppliers late, either deliberately or because of poor back office processes, their reputation could be badly damaged. Urgent preparation is required to comply with the new reporting requirements and to put in place proper processes that demonstrate prompt payment practices and fair treatment to suppliers.
It’s not new to talk about big bully businesses paying poor down-trodden supplier late. It is still a problem of course and a problem that has become worse over that couple of decades. Buyers extend payment terms to keep hold of cash longer making it more expensive for their smaller suppliers to operate. But now, the UK Government has stepped in. From April 2017, UK based businesses have to declare how they pay suppliers. They will be obliged to make public not only their payment policies but also their actual payment practices. This is intended to support small business but it could have some damaging effects for their larger customers.
There’s two sides to the payment terms story and governments have been right to stand back and not intervene too much. Just as small suppliers see their costs go up if their customers pay late, so can consumers pay the price if government forces businesses to pay too early. But the UK government move is smart. While businesses are not being made to pay promptly, by forcing them to publish the details of their policy and performance, unfair terms will be clear to all. And so will incompetence!
British business better get prepared. From April, unfair practice or poor payment performance is going to be out in the open. Urgent preparation is required to comply with the new reporting requirement and the same urgency is needed to put the supplier payment house in order so that what gets reported does not cause embarrassment – or worse.