UK payment practices regime updated – what does this mean for your business

Late payments can significantly impact small businesses across the UK, affecting cash flow, growth opportunities, and even business viability.

To address this issue and strengthen the battle against late payments, the UK 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

Originally introduced in 2017, the Payment Practices Reporting Regime enhances transparency in how large businesses handle payments to suppliers.

By encouraging 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.

These reports are 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 extend the reporting requirements until 6 April 2031 and introduce significant updates:

  1. Reporting Disputed Invoices: Businesses must now report on the proportion of invoices that are disputed and subsequently result in late payments beyond the agreed terms.
  2. Total Value of Payments: 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.
  3. Clarity on Third-Party Supply Chain Finance: The amendments provide clarity on how to report payments when third-party supply chain finance providers are involved, ensuring transparency in all payment processes.

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

Why this matters

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 organizations must:

  • Comply Vigilantly: Follow the detailed reporting requirements.
  • Manage Payment Processes: Actively manage payment processes to avoid damage to reputation.
  • Ensure Accuracy: Discrepancies in reports can lead to legal consequences and harm 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.

Posted in blog, Business, Business Advice, Financial Planning, SME's.