To strengthen the battle against late payments which significantly impact small businesses across the UK, the Government has extended and expanded the Reporting on Payment Practices and Performance Regulations.
The updated regulations came into force on 5 April 2024 in the hopes of improved prompt payment practices for businesses across the country.
Background of the payment practices reporting regime
Introduced originally in 2017, the Payment Practices Reporting Regime was designed to enhance transparency in how large businesses handle their payments to suppliers, aiming to encourage a culture shift towards prompt payment.
The regime requires large companies and limited liability partnerships (LLPs) to report biannually on various aspects of their payment practices and performance, including average payment times and the percentage of invoices settled within agreed terms.
These reports are made publicly available on a Government-hosted website, providing valuable insights for small businesses and enhancing market transparency.
What’s new in the 2024 regulations?
The 2024 Regulations have not only extended the duration of these reporting requirements until 6 April 2031 but have also introduced several significant updates to the reporting process.
Businesses must now report on the proportion of invoices that are disputed and subsequently result in late payments beyond the agreed terms.
There is a new requirement to report the total value of payments made within a 30-day period, as well as the total value of payments not made within the payment period.
The amendments provide clarity on how to report payments when third-party supply chain finance providers are involved, ensuring that all aspects of payment processes are transparent.
Increased longevity and continued review
With the regime now extended to 2031, and a scheduled review by 2029, the Government has committed to ongoing evaluation and improvement of the payment practices landscape.
Why this matters
For small businesses, late payments can restrict cash flow, limit growth opportunities, and in severe cases, risk business viability.
By forcing larger businesses to maintain transparency about their payment practices, the regime aims to empower small businesses to make informed decisions about who they do business with based on these companies’ track records.
Implications for large businesses
Large organisations need to be vigilant in their compliance with these updated regulations. This involves not only following the detailed reporting requirements but also actively managing payment processes to avoid damage to reputation.
Ensuring accuracy in these reports is crucial, as discrepancies can lead to legal consequences and damage to business relationships.
Looking ahead
The Government is set to release updated guidance for businesses covered by these regulations, which will provide further details on complying with the new requirements.
Contact us today to discuss how we can support your business in adapting to these new regulatory requirements.
