CCR2 Commercial Credit Management


Reporting for duty


A duty for larger companies to report on payment practices will not negate the need for improved credit management


Philip King Chief executive, the Chartered Institute of Credit Management philip.king@cicm.com


The government – and, indeed, previous governments of the last 10 years – have been keen to show they are on the side of small business, and are creating an environment in which SMEs can prosper and grow. They have certainly attempted various


means of achieving their goals, from reducing red tape to providing increased access to cash. On one particular theme, they are most


certainly united: the requirement to reduce late payment, thereby improving the customer-supplier relationship. The latest initiative comes from the


Department for Business, Energy and Industrial Strategy (BEIS), in the form of the Duty to Report on Payment Practices and Performance. In simple terms, it is a new obligation for


‘big’ businesses to post their payment records on a dedicated government website on how they treat suppliers, or face the risk of hefty fines for non-compliance. It will allow suppliers to compare and


contrast the payment performance of customers within their own industries. By ‘big’ businesses, the government


specifically means a business incorporated in the UK that meets or exceeds two or more of three specified thresholds on their last two balance sheets, the thresholds being: l An annual turnover of £36m. l A total balance sheet of £18m. l Employing 250 employees. The information for each reporting period


must reflect ‘the policies and practices which have applied during that period, and the business’ performance for that period’. The


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They must, similarly, declare whether suppliers are being offered e-invoicing or supply- chain finance, and whether the business’ practices and policies cover deducting sums from payments as a charge for remaining on a supplier’s list, and whether they have done this during the reporting period


report must be published on a web-based service provided by, or on behalf of, the government within 30 days of the end of the reporting period.


Payment terms In terms of the detail, businesses will have to declare their ‘standard’ payment terms, which must include: l The standard contractual length of time for payment of invoices. l The maximum contractual payment period and any changes to the standard payment terms in the reporting period. l How suppliers have been notified or consulted on any changes made. It must also state the business’ process for


resolving payment disputes. When it comes to the statistics, businesses


will have to state: l The average number of days taken to make payments in the reporting period, from the date of receipt of invoice or other notice. l The percentage of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer. l The percentage of payments due within the reporting period which were not paid within agreed terms. They must, similarly, declare whether


suppliers are being offered e-invoicing or supply-chain finance, and whether the business’ practices and policies cover deducting sums from payments as a charge for remaining on a supplier’s list, and whether they have done this during the reporting period.


April 2017


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