New regulations will soon force large businesses to publish late payment practices to suppliers, as the government steps up efforts to increase supply chain transparency in Britain.
To hold business owners to account, changes to the law will require invoice activity to be made public twice a year, including the average time taken to pay small suppliers.
The regulations were announced by the Department for Business, Energy and Industrial Strategy (BEIS) alongside new reporting guidance to prepare large businesses in publishing payment practices before the policy is introduced officially in April 2017.
Crucially, companies that fail to follow government guidelines will be committing a criminal offence.
In a statement, small business minister Margot James said that the £26.3bn owed to small firms in outstanding payments was “unacceptable” and a barrier to business growth.
“Large businesses have an important role to play and the guidance published today will help them fulfil their responsibilities and improve late payment practices across the board,” she said of the announcement.
According to the Federation of Small Businesses (FSB), effective action into late payments would have saved 50,000 small firms from folding in 2014 alone, representing a £2.5bn loss to the economy.
New late payment regulations represent part of the government’s strategy to end poor supply chain practices in the UK, with a small business commissioner expected to be announced in 2017 with the role of supporting owners in securing invoice payments.
The government’s Prompt Payment Code (PPC) was introduced in 2015 and asked businesses to ensure supplier invoices are paid after a maximum of 60 days. The PPC has so far failed to have an impact on the country’s late payments culture.
Commenting on the new regulations, Mike Cherry, national chairman of the FSB, acknowledged the government’s “transparency agenda” in tackling late payment practices.
“We welcome this as an important tool to change a UK business culture where it is deemed acceptable to pay small firms late,” he said in a statement.
“It’s now crucial that these regulations are introduced and robustly enforced with proper sanctions put in place for any large business that tries to hide its payment practices,” Cherry added.
Cherry has previously criticised the “imbalance of power” in Britain’s supply chains, and the new terms enforce a legal responsibility on large businesses.
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