From April this year companies that are slow payers face being named and shamed, according to Liverpool and Chester law firm DTM Legal. Tony McDonough reports.
Big firms face being “named and shamed” later this year if they are too slow paying their smaller suppliers.
Liverpool and Chester law firm DTM Legal says a new law comes into force this April which will put the payment practices for all large businesses in the public spotlight.
DTM Legal said businesses effected need to ensure they have the adequate systems and processes in place for the information gathering and reporting
They also need to carefully scrutinise their payment policies and practices to prepare for the increased transparency.
The new law is a wake-up call for large companies and welcome news to small business suppliers across the North West, according to Ed Barnes, partner at DTM Legal.
He said: “Small and medium-sized businesses need to be made aware of the new law as it will give them the opportunity to make informed decisions about who to trade with, help them negotiate fairer terms and challenge late payments.
“Late payments are a huge problem for SMEs across the North West and we have come across cases where they have resulted in disastrous consequences for smaller businesses.
“They can cause cash flow problems, hamper investment and, in severe cases, even present solvency risks to businesses.
“The UK Government reported that in June 2015, £26.8bn in late payment was owed to SMEs although many commentators believe the figure to be much higher.”
According to the latest business in Britain report published recently by Lloyds Bank Commercial Banking, North West SMEs are owed, on average, in excess of £100,000 – and the figure is rising.
While protecting smaller businesses, the legislation will also ensure large businesses are more open about their payment procedures.
The new law applies to any company or LLP which exceeds two of any of the thresholds of more than 250 employees, over £18m balance sheet total and over £36m annual turnover.
Big businesses have just three months to prepare to start reporting payment information which includes the average time taken to pay invoices and the proportion of invoices which were not paid within agreed terms.