The Impact of the Small Business, Enterprise and Employment Act 2015: Payment Practices
July 30th, 2015
Tamanna Keir, Genus Law
In the second of our series of articles looking at the Small Business, Enterprise and Employment Act 2015, Tamanna Keir of Genus Law takes a look at the provisions that may have an impact on the payment practices of businesses.
One of the principal intentions of the Act is to introduce a new level of transparency in the UK business market. By incentivising businesses to improve their payment policies and practices, the Government hopes that suppliers will have more information on what to expect from their customers and can make an informed decision on whether to enter into a commercial relationship.
Earlier this year, large household name companies were accused of abusing their small suppliers by forcing them to wait months on end for their bills to be settled and there is a reported £41.5bn owed to SMEs.
The Secretary of State proposes to tackle the problem of late payment by imposing a duty on large companies to publicly report on:
– their standard payment terms;
– any variation to their standard payment terms;
– the average time taken to pay invoices from the date of issue;
– the proportion of invoices paid within 30 days, over 30 days, over 60 days and over 120 days;
– the amount of late payment interest owed and paid; and
– any dispute resolution mechanisms.
The reports should be detailed on the company’s website and are intended to make payment practices more transparent, enabling smaller companies to enter into commercial relationships with their eyes wide open and to negotiate fairer deals.
Other provisions are included to improve access to finance for small and medium sized business by removing legal barriers to invoice finance and making it easier for them to seek a loan from lenders other than their own bank.
The above list is not exhaustive and may be subject to change, although the provisions are expected to be implemented by April 2016 following the introduction of secondary legislation to give effect to them. The transparency that will undoubtedly accompany these changes means that now is the time for businesses to standardise their payment practices and the terms on which they do business.
The likely effect of these changes is that companies will compete against their peers to become a more commercially attractive company to do business with. At Genus Law, we can help you to prepare for these impending changes and, with a comprehensive and cost effective review of your terms of business, ensure that your terms are fair, reasonable and legally compliant.
Where you have struggled with late payment, we also have debt recovery services to ensure that you no longer have to suffer as a result of the poor payment practices of other businesses. Our Legal Health Check can also help you uncover the issues you didn’t even know existed in your business and deal with them, before they become a problem. To speak to a member of our legal team who can help you with any of these issues, please call us on 0113 320 4540 or email [email protected]