Press release

Hancock: Large firms must publish payment practices

This news article was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Large companies will be made to publish their payment practices, as part of a government drive to level the playing field for small business.

From April 2016, large companies will be required to publish their payment practices twice a year to make sure that small companies do not get caught out.

Under the new rules, large companies will be required to disclose:

  • payment terms
  • average time taken to pay
  • proportion of invoices paid beyond agreed terms
  • proportion of invoices paid
    • in 30 days or less
    • between 31 to 60 days
    • beyond 60 days
  • any late payment interest owed and paid

Report on payment practices and performance (PDF, 58.7KB, 1 page)

Large firms will have to publish the information to a central digital location such as an online portal, which will be made publically available by the government.

Business Minister Matthew Hancock said:

We are determined to make Britain a place where late payment is unacceptable and 30-day terms are the norm - with a clear 60-day maximum.

We’ve acted to ensure all public payments do that, right down the supply chain, and are bringing in new strict transparency rules.

These new rules will make poor payment performance a boardroom reputational issue for companies and help change the culture once and for all.

These new reporting requirements also mean large companies will have to publically declare whether financial incentives are required to join or remain on supplier lists.

The new payment portal will enable data to be collected on dispute resolution processes, e-invoicing, supply chain finance and preferred supplier lists.

Companies will also report on their membership of codes of practice such as the government-backed Prompt Payment Code, which was recently strengthened to promote 30-day terms as standard, with a 60-day maximum limit. In the Budget earlier this week, the government announced that the scope of the code will be extended to consider other poor payment practices.

The government intends to lay secondary regulations early in the next Parliament, with the requirement coming into force in April 2016. Setting out the plans today (20 March 2015) will give large companies as much time as possible to prepare for their future obligations.

Notes to editors:

  1. The Department for Business, Innovation and Skills published its consultation paper ‘Duty to Report on Payment Practices and Policies’ on 26 November 2014. The consultation closed on 2 February 2015. A summary of responses was published on 2 March 2015.
  2. The government today (20 March 2015) announced plans for implementing the new reporting requirement to give those affected as much notice as possible to prepare for their future obligations. These plans are subject to the will of Parliament.
  3. Having considered the views of respondents and arguments put forward during Parliamentary debates, we have concluded that large organisations should be required to report on the following narrative and metrics:
    • standard payment terms, including any changes to these in the last reporting period. We will provide guidance to further clarify the expectations of companies in circumstances where they have different standard terms for different kinds of products
    • average time taken to pay
    • proportion of invoices paid beyond agreed terms
    • proportion of invoices paid in 30 days or less; paid between 31 to 60 days; and paid beyond 60 days. The government will, however, not require reporting on the proportion of payments between 61 to 120 days and beyond 120 days, because we are clear that all payments beyond 60 days represent bad practice. This is why we have recently introduced a maximum 60 day payment term in the voluntary Prompt Payment Code:
    • amount of late payment interest owed and paid
    • whether financial incentives were required to join or remain on supplier lists
    • dispute resolution processes
    • the availability of: e-invoicing; supply chain finance; preferred supplier lists
    • membership of a Payment Code
  4. Companies will be required to report on a half-yearly basis, and will need to provide this in open data format to a single central digital location.
  5. Large companies will be required to report from April 2016. We are therefore developing the secondary legislation, IT systems and guidance needed to give effect to them. The government intends to lay secondary regulations early in the next Parliament.
  6. These proposals will allow organisations with good payment records to highlight and celebrate their payment performance, while raising public awareness and scrutiny of poorer payers. This has the potential to cause a fundamental shift in the payment performance of the UK’s large organisations.
  7. The introduction of a new reporting requirement follows intensive discussions with stakeholders about how to achieve a change in prompt payment culture. In December 2012 the government’s ‘Building a Responsible Payment Culture’ discussion paper consulted on a range of different options. Over 70% of respondents called for more transparency over payment practices. The government consequently committed itself to taking a legislative power in the Small Business, Enterprise and Employment Bill to introduce a new, tough requirement through secondary legislation to increase transparency around how companies pay their suppliers.
  8. On 26 February 2015, the government announced changes to the Prompt Payment Code to:
    • enshrine a 30 day payment target as a norm, with a maximum 60 day target for most payments (95% of payments) or if there are exceptional circumstances
    • require all code signatories to report on their payment practices, in line with the new mandatory reporting requirement being introduced by the government. While this is mandatory for large businesses, smaller businesses will be required to report on a narrower set of metrics on a comply-or-explain basis
    • establish a new Compliance Board, with the ability to investigate, help, sanction and if need be expel signatories from the code
    • improve the code website to promote best practice