As The Journal’s Pay Fair campaign continues, Business Minister Matthew Hancock has unveiled new proposals obliging large and listed companies to publish detailed information about their payment practices and performance.
If implemented, the changes would mean the provision of robust information, making it easier for small businesses to compare role model firms with the less reputable.
Specifically, businesses would be required to provide average payment times, state the proportion of invoices paid beyond terms, and show the proportion of invoices paid within 30 days, over 30 days, over 60 days and over 120 days.
Reporting on a quarterly basis would be a mandatory requirement for all large and quoted companies.
The proposals will be incorporated into the Small Business, Enterprise and Employment Bill, which is currently going through Parliament.
They were developed in response to feedback from an earlier consultation, in which a clear majority of consultees supported the idea of increased transparency.
“Tackling late payment is at the heart of our drive to help small businesses,” Mr Hancock said.
“Coming from a small business background, I know just how critical late payment can be for small firms’ cashflow.
“We know that small businesses are often reluctant to risk losing business by using the redress measures we’ve put in place, so we want to tackle the underlying culture by increasing transparency on payment practices and performance.
“The measures we are consulting on will make it clear to small businesses and consumers alike which large businesses behave properly, and those that think they can ride roughshod over their suppliers.”
Philip King, chief executive of the Institute of Credit Management, which administers the Prompt Payment Code on behalf of the Department for Business, Innovation and Skills, said: “Transparency is a key element in changing culture across many aspects of business, and payment behaviour is no exception.
“I applaud the measures in the Small Business Bill to drive change by allowing more visibility of how businesses behave in paying their suppliers.”
The proposals were also welcomed by the Federation of Small Businesses in the North East.
Regional chairman Ted Salmon said: “It is time to put a stop to big business using their size and power to force small firms to accept late payment, excessively long payment terms, or demand payment to be on a supplier list.
“Small businesses are suffering, stifling their ability to grow, and this problem is only getting worse despite the economic recovery.
“In 2008 £18.6bn was owed to small firms by big ones, in 2014 this has rocketed to £46.1 billion.
“The moves to greater transparency proposed in this consultation are welcome as they include 18,000 of the largest firms.
“However, the worst offenders will choose not to sign up to the voluntary Prompt Payment Code, leaving small businesses few options to combat late payers.
“Small businesses need to be given real power fight back.”
Through the Pay Fair campaign, The Journal is encouraging North East companies of all sizes to take a responsible and ethical approach to paying firms within their supply chain.
We are asking firms to sign the Business Ethics Pledge created by the North East Institute of Business Ethics, thereby agreeing to join with others to discuss the value of business ethics and to work with each other to transform their working environments for the better.
For more information, see http://www.nibe.org.uk/