Late payments of invoices is a large problem for many suppliers, especially in the SMB segment. Now the UK government is taking measures. Starting next month – on April 6th to be exact – large companies and limited liability partnerships (LLPs) in the UK need to report their payment practice, including average time for paying supplier invoices, twice a year.
The new regulation applies to any company or LLP meeting two of the following three criteria:
Businesses affected by the new guidelines need to report on their payment performance at the half-way point of their financial year and then again at the end of it. The UK government will provide a web service, part of the www.gov.uk website, for businesses to publish the information. Suppliers, and other interested parties, will be able to view the information as soon as published.
The reports should provide a breakdown of payment performance on the percentage of invoices paid between one and 30 days, the percentage paid between 31 and 60 days, and the remaining balance. Businesses must also publish the average time it took to pay supplier invoices during the last reporting period.
It’s quite interesting to note that if a business fail to comply, or provide false information, this will be seen as a criminal offence for which the business can be prosecuted and fined. Therefore, the initiative will likely to have a great impact on the issues arising from late payments, and other countries will be closely following the results of the guidelines in the UK over the next years. It’s likely that other countries will look to implement similar measurements and reporting to improve visibility of risk in trading with those clients, and better understand the likely cash flow required to monitor and fund credit accounts.
Of course, deploying automated invoice matching, and approval systems for payment with your supplier invoices minimizes the risks of late payments, while at the same time reducing the operational costs and removing the human error, allowing the accounts payable function to focus on improving the spend control and visibility for the business.