What is payment practices reporting?

From April 2017 the Department for Business, Energy and Industrial Strategy (BEIS) introduced legalisation for large companies and Limited Liability Partnerships (LLP) to enforce reporting on payment practices.

Each eligible company and LLP has a duty to report on payment policies, practices and performance every six months annually.

The reporting requirement was introduced after many voices of concerns to the government about the detrimental impacts of thousands of companies after not being paid on time.

What are the main objectives of payment practices reporting ?

There are three important key objectives to regular reporting.  

1. Increasing transparency of large UK companies is a primary goal of Payment Practices Reporting (PPR). Large businesses that publish information about their payment practices makes them more accessible to suppliers.
2. Publicity of their payment practices and performance means companies are accountable for their own actions. This promotes them to actively upkeep their reputation, consider competition and provides incentive to improve payment practices and performance.
3. Small businesses are often the most affected by late payments. This regulation helps protect smaller enterprises by encouraging larger companies to pay on time so other businesses can maintain a healthy cash flow.

Who needs to do payment practices reporting?

If you fall under this criteria, you are in luck. Businesses that are in their first year of operation or who are not under UK legalisation do not need to comply to the regulation.

Only UK companies and LLPs (limited liability partnerships) who align with at least two out of the three following on their last two balance sheet dates are caught by these rules.

• Over £36 million of annual turnover  
• Over £18 million on balance sheet total
• Over 250 employees

Companies that fit the criteria and exceed the medium-sized company threshold are referred to as 'qualifying companies and LLPs'.

What about companies with subsidiaries (parent company)?

Companies with subsidiaries are known as a parent company and follow a slightly different criteria.

A parent company cannot report on a group level. Each subsidiary counts as an individual entity and PPR reports are completed per entity if they pass the threshold above .

A parent company will be required to report if they fit at least two of these slightly differing criteria:

• Over £43.2 million annual turnover
• Over £21.6 million on balance sheet total
• Over 250 employees

If an international business has a subsidiary in the UK, it will have to report as an individual entity. The international parent company will not be required to do so.

How often is payment practices reporting done?

Reporting must be completed bi-annually. There are two reporting periods each within a six month period.

The times at which the biannual reports are due depends on when your company's financial year commences.

For an example, if your financial year begins on 1 April 2024 then your first reporting period spans from 1 April to 30 September 2024. The deadline for publishing the first report would be 30 October 2024.

Reports are due within 30 days after each six month reporting period.

What needs to be reported?

Specific information regarding payment practices and performance for qualifying contracts is required for each reporting period.

What are the checkpoints of a qualifying contract?

• Between two or more businesses (this is not limited to just a company also can include public sector bodies and sole traders)
• Sufficiently linked to the UK
• Contracts regarding goods, services and intangible property
• Not in relation to financial services

More information on this can be found here.

How do I do payment practices reporting?

Reporting is done via a web-based government portal where your report is published publicly.

There are 3 essential elements to include in a PPR report.

Statistics  

• The average number of days taken to make payments to suppliers in the reporting period, from the date of receipt of invoice or other notice
• The percentage of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer
• The percentage of payments due within the reporting period which were not paid within agreed terms.

Narrative

• The business’ standard payment terms, which must include:
• The standard contractual length of time for payment of invoices
• Maximum contractual payment period and any changes to the standard payment terms in the reporting period
• How suppliers have been notified or consulted on these changes

•  The business’ process for payment dispute resolution

Statements

• Whether suppliers are offered e-invoicing
• Whether supply chain finance is available to suppliers
• Whether the business’ practices and policies cover deducting sums from payments as a charge for remaining on a supplier’s list and whether they have done this in the reporting period
• Whether the business is a member of a payment code, and the name of the code

Benefits

Improved practices

The implementation of this regulation encourages fair practices on an internal basis, leading to a broader fairness for business transactions at an industry level.

Individual company data collected can be compared across an industry to identify areas of positivity and improvement. This can also promote competition between competitors to have improved practices after recognising learning curves within their own PPR reports.

Helping to overall improve various companies.  

Supplier confidence

Suppliers will have elevated confidence in those with healthy practices shown in their PPR report. If suppliers can see this demonstrated with positive information such as high percentages of invoices being paid on time, they will feel confident investing in those companies.

Additionally, as company statistics are public it means supply chain partners are more likely to be paid on time. This means suppliers can maintain a seamless cash flow so positive relationships can be forged with larger businesses.

Market discipline

An additional benefit is that the government endorsement deters poor payments practices and incentivises good behaviour to maintain a company's own reputation.

Poor payments practices and performance could lead to a competitive disadvantage. If outsiders see this, it can have a profound negative impact on financial health. Suppliers are discouraged from working and investing with them due to late payments.

How Cardflo Helps with Payment Practices Reporting

Despite the complexities of payment processing data, Cardflo has built its reporting system to be effortless and easy to understand.

With full risk, chargeback and processing analytics from one easy to understand dashboard, payment practices reporting will never be confusing again. Cardflo's in-house development team can even customise your reporting just for you!

Contact us today to see how we can help.

Conclusion

Payment practices reporting fosters transparency and accountability among large UK companies, ensuring timely payments and promoting fair business practices.

By highlighting positive practices and exposing poor performance, the regulation encourages businesses to improve their payment processes, enhancing supplier confidence and strengthening relationships across industries.

Cardflo's intuitive reporting tools simplify compliance, empowering businesses to meet regulatory requirements with ease.