Commercial Debts - Late Payment Reporting

New regulations designed to help small businesses get paid on time came into force this month, with a requirement for larger companies to publish information about how long they take to pay suppliers.

The requirement affects medium and large companies and LLPs who exceed two or more of the qualifying thresholds at the date of their last two balance sheets. 

From 6 April 2017, those qualifying will be required to publish information on a Government website about their payment practices and policies and how they have performed against them, including the average time taken to pay suppliers, and to update the information every six months.

Late payment is recognised as causing serious financial and administrative problems for businesses and the aim of the new regulations is to tackle concerns about adverse treatment of smaller suppliers by larger, more powerful customers, through increased transparency and scrutiny.

"It’s important that larger businesses check whether they are required to report under the regulations, and must then keep an eye on the thresholds as these will be updated over time" explains partner and head of the commercial department, Gillian Jones. "Smaller businesses can ask new customers whether they are required to report and, if they are, check out payment performance as part of their pre-contract checks”.

She added: “It’s worth remembering that there are other existing measures already available to tackle late payment, including the option of claiming interest and recovery charges, and it’s worth checking that existing contract terms don’t undermine those rights with something less advantageous.”

Under the Late Payment of Commercial Debts (Interest) Act 1998 commercial businesses are expected to pay their supplier invoices within 30 days, unless they have both agreed a longer time limit of no more than 60 days. Alongside, all public bodies are required to pay suppliers within 30 days, except for some specific or devolved activities.

Statutory interest can be applied, together with a fixed sum of between £40 and £100, depending on the sum owed, for the cost of recovering the late commercial payment. The interest is currently set at 8% plus the Bank of England base rate, and starts to run automatically at 30 days from the latest date of either receiving the supplier's invoice, or of receiving or accepting the goods or services.

You can agree a longer period for payment, but if it’s more than 60 days it must be fair to both businesses. And unless a ‘reasonable’ longer period has been agreed, any purchaser must confirm that goods or services conform with the contract within 30 days.

Late payment legislation does not have to be referenced in trading terms, as it will apply automatically in any commercial relationship, unless an alternative process has been set out in the contract.

If you wish to have your terms and conditions reviewed to ensure that you are in the best position to recover debts owed to you contact Gillian Jones.

 
 
 

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