The current government appears determined to address abuse associated with payment in commercial transactions. Last year witnessed a great deal of activity in this regard. There was a consultation on the processes to be adopted by the Small Business Commissioner who will hear payment-related complaints from firms. The Commissioner is likely to be appointed in 2017. Next there was the review of the cash retentions system in the construction industry. The outcome of this review is currently awaited. In December 2016 the Government published draft regulations that will require large companies to report on their payment performances. At the time Margot James MP, the Minister for Small Business said: “As of June 2015, the overall level of late payment owed to small and medium sized businesses was reported as £26.8 billion. This is why it is crucial for government to take action to create a more responsible payment culture, which enables all businesses to thrive and develop." Requirement to report on payment performance The Reporting on Payment Practices and Performance Regulations 2017 came into force on 6 April 2017. They were introduced under section 3 of the Small Business, Enterprise and Employment Act 2015. The Regulations apply to large companies. These are individual companies – private, public, quoted - and limited liability partnerships which exceeded two or all of the following thresholds on both of their last two balance sheet dates: ■ over £36m annual turnover; ■ over £18m balance sheet total; ■ over 250 employees. The information to be provided by large companies There are three types of information that have to be provided: 1. A description of: ■ the company’s “standard payment terms” (including the periods for payment); ■ changes to standard payment terms (including whether suppliers have been notified of/consulted on the changes); ■ the company’s dispute resolution processes; ■ the maximum payment period included within a contract entered into by the company during the reporting period. “Standard payment terms” mean the standard terms relating to payment that the company uses for this “type” of contract. The reference to “type” suggests that, in its reporting, a company has to list the different types of contract it has entered into over the reporting period. 2. Statistics have to be provided in relation to: ■ the average time taken to pay invoices/payment applications; ■ the percentage of invoices/ payment applications paid in 30 days (or in less than 30 days), within 31 and 60 days, and over 60 days; ■ the proportion of invoices/payment applications that were not paid within the agreed terms. It should be noted that the above payment periods commence on the day on which the company receives an invoice or payment application. 3. The company has to state whether: ■ it offers e-invoicing; ■ it offers supply chain finance; ■ its practices and policies include deducting sums from payments as a charge for being on/remaining on a supplier’s list and whether this was done in the reporting period; ■ whether it subscribes to a payment code and name of that code. Requirements relating to publishing the information Companies will have to publish the information on a website to be set up and maintained by the Department for Business, Energy and Industrial Strategy. Companies have two reporting periods over their financial year. The first reporting period is the six months following the first day of the financial year and the second is the remainder of that year. Failure to report or the issuing of false statements is a criminal offence committed by the company’s directors or, in the case of a false statement, by the director(s) who was responsible. In theory these reporting requirements should make a difference but their impact will depend upon the degree to which they are enforced. Enforcement will be facilitated by employees of large companies or firms in the supply chain being prepared to “whistleblow” in the event that the information published by a large company was false. It is also important to note that large companies will be reporting on their payment record across the board. This could, of course, mean that supply chain payments in construction are better than they might appear to subcontractors/ suppliers since they are mixed in with other contracts such as regular purchases of “small ticket” related goods and services. Will these measure make a difference? Time will tell. More regulations on payment: but will they deliver? È Professor Rudi Klein, Chief Executive, SEC Group. LEIA ANNUAL REVIEW 2017