Large companies and directors could face criminal proceedings and fines if they do not disclose information about the treatment of their suppliers twice a year. This is part of a crackdown to stamp out any bad payment practices, which contribute to thousands of business failures each year.
Under a new ruling that is coming into force this April, larger firms will be required to publish their payment practice details on a website set up by the Department for Business, Energy & Industrial Strategy (BEIS). The BEIS will pursue criminal legal action against the companies and the directors if they fail to provide updates on their conduct twice each year. If the company is convicted of a criminal offence in magistrate’s court, they will be fined a large sum of money.
The Federation of Small Businesses estimated that 50,000 business failures could be avoided if suppliers were paid on time. According to payment processing company Bacs, there is more than £26.3bn in late payments outstanding to SMEs.
Tom Rolfe, Co-Owner of The Channel Partnership commented on the news saying “The claim is that this reporting will force large firms to pay more promptly – there is reference to £26.3bn being owed in late payments to smaller companies – this assumes that larger companies are sitting on huge cash piles and could pay out this £26.3bn if they chose to. I’m not sure that’s the case. It may be that as a result of the new legislation, large companies will insist on longer credit terms from their suppliers – this will mean they can then take the same length of time to pay as they do now, but can report prompt payment practices.”
If you are looking to introduce Credit Insurance to your business for security, please contact one of our specialist advisors on 01275 817320 or visit our website: https://www.the-channel-partnership.co.uk/.