The Reporting on Payment Practices and Performance Regulations 2017 (SI2017/395) came into force on 6 April 2017. Since then, large companies have had to prepare a report on their payment practices and policies. This is part of the government initiative of building a responsible payment culture designed to assist suppliers, particularly small businesses.
The report only relates to business contracts for goods, services or intangible assets (including Intellectual Property) which are sufficiently linked to the UK. Contracts in relation to financial services are excluded.
A company does not have to report in the first year after incorporation. The reporting obligations begin in the second financial year if a company exceeds two or all of these thresholds:
- Maximum turnover (currently £36 million),
- Balance sheet total (currently £18 million),
- Average number of employee (currently 250).
95 academy trusts reported in March and this number is expected to increase.
In each financial year, a qualifying company is required to produce two reports: one every six months via an online form. The information that must be reported includes: narrative descriptions of business standard payment terms and processes for resolving payment-related disputes; statistics on payment activity; and a number of statements related to payments, such as whether suppliers are offered e-invoices.
If a qualifying company does not publish a report containing the necessary information within the specified 30-day filing period, an offence is committed by the company and by every director. Providing misleading, false or deceptive information, whether knowingly or recklessly is also a criminal offence punishable by a fine.
The results, which are available to the public, show that the majority of Academy Trusts pay monies due within 30 days of receiving an invoice. The highest average payment time is 56 days. However, this may well be because certain contract payment terms are longer and it does not necessarily mean that payments are being made late. In fact six academy trusts paid all their invoices within the agreed terms. Well over half of reporting academy trusts have 30 days or more as their shortest standard payment period. The highest percentage of invoices not paid within the agreed terms for academy trusts is 68%. For comparison, a law firm, a well-known restaurant chain, a charity and even a breakfast cereal all have the dubious honour of being among the companies who pay over 85% of invoices after payment terms.
This reporting requirement is part of the trend which sees academy trusts being viewed alongside and judged in the same way as businesses and commercial enterprises. The reports are also part of the increasingly high standard of transparency which companies in general are held to. The danger is that these statistics are used out of context and academy trusts receive undue criticism. We shall see whether the next report shows significant changes in company behaviour, and therefore whether the reporting requirement has had the intended outcome.