Late payments are one of the key reasons businesses fail. At TISCreport we want to give buyers the ability to both show and assess good practice in making payments to suppliers. Find out more about what we're doing below..
What is the Prompt Payment Code?
The Prompt Payment Code is a voluntary code of conduct for businesses in the UK that aims to promote fair payment practices and ensure that suppliers are paid on time. The code is administered by the Chartered Institute of Credit Management (CICM).
What are the Payments Practice and Performance Reporting Regulations?
The UK payment practices and performance reporting regulations 2017 are a set of rules that regulate the payment practices and performance reporting of businesses operating in the United Kingdom. These regulations aim to improve the transparency and fairness of payment practices in the UK, and ensure that businesses are held accountable for their payment practices and performance.
The Payments Practice and Performance Reporting Regulations were brought in under Section 3 of the Small Business, Enterprise and Employment Act 2015 (and, for limited liability partnerships (LLPs), Section 15 of the Limited Liability Partnerships Act 2000) making it a legal obligation for large companies to report on their payment practices with suppliers. The reporting obligation is on a half-yearly basis.
The payment practices government guide outlines the scope being companies that satisfy two out of the following criteria:
- £36 million annual turnover
- £18 million balance sheet total
- 250 employees
The list of companies in scope has not, to date, been published by UK Government. However on TISCreport we have identified all those who can be determined via access to available open data. You can see this data in action for FTSE100 companies on our public demo FTSE 100 Transparency Dashboard.
Are there any legal requirements related to payment practices and performance reporting?
What are the consequences for companies that do not adhere to the Prompt Payment Code or other payment practice regulations?
Companies that do not adhere to the Prompt Payment Code or other payment practice regulations may face consequences such as negative publicity, damage to their reputation, and a loss of trust from their suppliers. In severe cases, non-compliance may also result in legal action.
How can I find out more about the Prompt Payment Code and payment practice regulations?
You can find out more about the Prompt Payment Code and payment practice regulations by visiting the CICM website or contacting them directly. You can also visit the UK government's website for information on payment practice regulations and reporting requirements.
How does the Prompt Payment Code work?
Companies that sign up to the code agree to pay their suppliers within agreed terms and to provide clear information on payment practices. They also commit to resolving disputes quickly and fairly. The CICM monitors compliance with the code and publishes regular reports on the performance of signatories.
What are the key provisions of the UK payment practices and performance regulations?
- Requiring businesses to publish information about their payment practices and performance on a regular basis
- Establishing a duty for businesses to report on their payment practices and performance to the government
- Providing for the creation of a government-run payment practices and performance reporting database, which will allow businesses to compare their practices and performance to their peers
- Requiring businesses to have written contracts with their suppliers that clearly set out their payment terms and conditions
- Providing for the creation of a complaints and appeals process for suppliers who feel they have been unfairly treated by businesses with regard to payment practices and performance
How often do businesses need to report on their payment practices and performance?
Businesses are required to report on their payment practices and performance at least once per year. The first report was due by April 30, 2018.
What information do businesses need to include in their payment practices and performance reports?
Businesses are required to report on a range of payment practices and performance indicators, including:
The average number of days taken to pay invoices
The percentage of invoices paid within 30 days
The percentage of invoices paid within 60 days
The percentage of invoices paid within 120 days
The percentage of invoices disputed
The percentage of invoices paid late
Any changes to payment terms and conditions
Any instances of supply chain financing or factoring
Any instances of the business requiring suppliers to bear the cost of goods or services before payment is made
What happens if a business fails to report on their payment practices and performance?
If a business fails to report on their payment practices and performance as required, they may be subject to fines and penalties. In addition, the government may choose to publish the fact that a business has failed to report, which could damage the business's reputation.
Why should I use Payment Practices Reporting data as part of my due diligence?
- Assessment of payment behaviour: PPR data allows you to evaluate a company's payment behaviour and track its historical payment performance. It provides information on whether the company pays its suppliers on time or faces frequent delays in settling invoices. This can help you assess the company's financial discipline and reliability as a business partner.
- Risk identification: By analysing PPR data, you can identify potential financial risks associated with a company. If a business consistently pays its invoices late or exhibits a pattern of late payments, it could indicate cash flow issues or financial instability. This information can be critical in determining the level of risk you are willing to undertake in your business dealings.
- Supplier relationships: PPR data can offer insights into a company's relationships with its suppliers. If a company maintains a good payment track record, it suggests that it values its supplier relationships and is committed to maintaining healthy business partnerships. On the other hand, a company with a history of late payments or payment disputes may indicate strained relationships or operational inefficiencies.
- Benchmarking and industry analysis: PPR data can be used to compare a company's payment practices against industry benchmarks. This analysis can help you understand how a company's payment behaviour aligns with industry standards. It can also provide a basis for negotiation and determining fair payment terms, allowing you to make informed decisions during business transactions.
- Financial forecasting: By examining payment patterns through PPR data, you can gain insights into a company's financial performance and liquidity. This information can be valuable when forecasting cash flows, assessing creditworthiness, or evaluating investment opportunities
PPR data can provide useful information to provide context when considered with other due diligence practices, such as financial statements, credit reports, and legal documentation. Combining multiple sources of information will help you form a comprehensive understanding of a company's financial position, their payment practices and their ethics.
What is the TISCreport Prompt Payment and Payment Practices Data Set?
The prompt payment code signatories and Payment Practice Reporting Regulations compliance datasets form part of the Decent Work (UN SDG 8) ESG bundle. The impact of late payments increases exponentially down through supply tiers, leaving the most vulnerable suppliers and workers at the ends of those supply chains at greatest risk of exploitation. Subscribing to this bundle will enable your organisation to influence better supplier behaviour on prompt payment whilst reducing your own supply chain risks.
How do I use the Decent Work Data Bundle work with the TISCreport dashboard?
By subscribing to the Decent Work data bundle you will be able to filter suppliers on your dashboard by the following as reported by those companies:
- prompt payment code signatory (PPC)
- in or out of scope for Payment Practices & Performance Regulations Reporting (PPPR)
- in or not in compliance with PPPR
- links to PPPR reports where they exist
- numbers of suppliers reported being paid within 30, 60, 90+ days
- supplier payment terms and proportion not paid within them
- shortest, longest standard payment periods
- payment term changes
- average time to pay in days
What is the HMRC National Minimum Wage Naming Scheme?
In October 2010 the government announced a new scheme to name employers who break minimum wage law. The naming scheme came into effect on 1 January 2011.
The objective of the naming scheme was to raise awareness of minimum wage enforcement and deter employers who would otherwise be tempted to break minimum wage law. Following issue of an Notice of Underpayment (NoU), employers have 28 days to pay all arrears to workers and the full penalty (or 14 days if they wish to take advantage of a 50% reduction in the penalty charge). HMRC refers details to BEIS, and BEIS considers whether to name the employer once all arrears have been paid to workers and the appropriate penalty has been paid.
If an employer appeals the NoU, they will not be referred to BEIS to consider Naming until the appeal is decided and is unsuccessful (if that is the case) and the appropriate penalty has been paid Naming will proceed if the employers does not appeal but fails to pay the arrears and/or penalty.
The naming scheme was revised in October 2013, and then paused in July 2018, to take account of Ministerial concerns and recommendations made by the previous Director of Labour Market Enforcement. Naming recommenced in December 2020, on a revised basis. Specifically, the government undertook to:
- increase the arrears threshold over which employers will be considered from naming from over PS100 to PS500 or more (with these exceptions)
- provide more information about reasons for breaches
- publish an educational bulletin for employers, highlighting common reasons for underpayment
- name employers more frequently than previously
The government is clear that the naming scheme is not an alternative to prosecution. However, if no appeal has been made and the NoU remains unpaid for 28 days, then the government will consider naming.
Full information can be found here:
What is a Prompt Payment Score and how is it calculated?
A Prompt Payment Score is calculated from available supplier data aggregated from consenting suppliers providing anonymised access to their collections reports. Currently TISCreport has integrations with Quickbooks, Sage and Xero which enable suppliers to make this data available. Once accessed, the following methodology is applied:
