Accounting Small Business Advice

Nearly half of Britain’s large businesses are failing to pay subcontractors on time

4 Aug 2018

Almost 50% of major firms in the UK are settling invoices with smaller business beyond the deadlines laid out in the Government’s new Payment Practices and Performance Reporting regulations.

Government regulations passed last year oblige big companies to report their payment terms and performance twice a year. Most will do so for the first time this April.

Only 29% of those that reported by December managed to settle bills within 30 days on average, and only 52% of invoices overall were paid within that time frame.

As a small business accountant and expert advisers to SMEs, the team at Accounts and Legal are dedicated to helping small businesses perform to their highest level and navigate any challenges they face along the way.

In this case, the cash flow of smaller businesses are essential to their survival. Therefore, strategically forecasting will help to safeguard your business against late payments and major contractors going bust.

Get in touch with us today, or try our instant accounting quote tool and one of our team will contact you directly to discuss how we can produce bespoke solutions, tailored to helping your business flourish.

What is Payment Practices and Performance Reporting (PPPR)?

The UK Government’s Payment Practices and Performance Reporting (PPPR) regulations, aimed at cutting the “severe administrative and financial burdens” firms are subjected to by not being paid on time, came into force last April.

The new scheme acknowledges that, in the worst cases, late payment can lead to insolvency on behalf of the smaller company.

Applicable to companies meeting two of three size criteria, including annual revenues of £36 million, balance sheet asset totals of £18 million and an annual average of 250 employees, the legislation requires them to report every six months on their payment practices, policies and supplier payment performance.

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Big businesses taking little man to the cleaners

Big companies must start paying suppliers on time or be forced to by law, the government’s small business commissioner, Paul Uppal, has warned.

The Carillion case has highlighted the issue of late payment after it was revealed that the collapsed construction group paid subcontractors with a 120-delay.

Thousands are now out of pocket, and some face bankruptcy. Late payment is one of the biggest challenges facing businesses, with up to 50,000 failing each year because they are owed money by other companies.

Across the UK, the average time taken by large enterprises to pay suppliers’ invoices is nearly 50 days, with one-third failing to settle payments in a punctual manner.

Uppal says this needs to change, stating, “We will name and shame if need be.”

In Scotland, research from KPMG has produced damning results. They estimate, in total, 900 Scottish businesses fit the criteria of comapanies required to file PPPR reports. In actual fact, only 17 Scottish registered companies had filed in the first round of reports.

In a statement, Alan Flower, the firm’s director of regional advisory practice said initial results of their research is “of concern to the small businesses community.”

He hopes the problem can be solved by “cultural change rather than legislation” but warns: “Ultimately if I don’t achieve this you are probably going to see legislation. There is a cross-party consensus on this. There is a political will for this to happen.”


Giving small businesses a voice

The Government are also trying to tackle supply chain bullying — the practice of big retailers forcing suppliers to give discounts on stock, then penalising them for minor infringements, such as supplying goods in a thinner box than stipulated in the contract.

For the most part, it seems small traders are reluctant to put their head above the parapet and use complaint mechanisms because they fear losing any contracts in place with larger contractors.

For now, the small business commissioner is operating on a shoestring, with an annual budget of £1.4m guaranteed only until April and just three staff, though there is hope the setup will expand to a team of 20 within the coming months.

Big businesses have got a voice and are relatively good at getting in front of government. With the small business commissioner, small businesses have the platform to pull together and become a collective voice.