You will now be aware of new legislation coming into effect in April this year that might directly affect your business. The new law has been introduced to protect the thousands of smaller businesses that suffer from late payments, which ultimately affects cashflow and potentially trading position.
In a report published by the Department for business energy & industrial strategy today (31st January 2017), businesses of a certain size are legally obliged to report on their payment practices. It will be a criminal offence against the business and each director, if there is a failure to publish a report that contains certain information.
WHO DOES THE NEW LEGISLATION AFFECT?
The law affects all companies who have any two of the following:
- £36m net turnover, or
- £18m balance sheet total, or
- 250 employees
There are more complex qualifying criteria depending on contracts that qualify, foreign ownership of business or parent companies. All of this is explained in more detail in a table and flow chart available on the table below.
|Annual Turnover||£45m ✔||£40m✔||£30m||£35m||£40m✔|
|Balance Sheet Total||£25m✔||£17m||£19m✔||£17.5m||£25m✔|
|Average no. of employees||350✔||200||450✔||250||251✔|
|Balance Sheet Total||£20m✔||£17m||£20m✔||£20m✔||£17.5m|
|Average no. of employees||350✔||200||450✔||450✔||249|
|Did the business exceed the thresholds|
for a medium-sized company in both
|Yes, the company’s figures exceed at least two of the thresholds for a medium sized company in both years||No, figures were below two of the thresholds in both years||Yes, the company’s figures exceeded two of the thresholds for a medium-sized company in both years||No, figures were below at least two of the thresholds in the last financial year||No, figures were below at least two of the thresholds on the balance sheet date before last|
WHAT INFORMATION WILL YOU NEED TO REPORT?
Companies that fall into the criteria for reporting will be required to publish information, that will be available to the public, about their payment terms to suppliers and subcontractors on particular contracts, such as:
– their standard and maximum payment periods
– how suppliers have been notified of any payment term changes
– how payment disputes are resolved
– statistics showing the average number of days taken to pay
– percentage of invoices paid between 1-30 days, 31-60 days and 61 days and over.
– The percentage of payments that were made within the contractually agreed period.
WHEN WILL YOU NEED TO REPORT?
When you need to submit your first report will depend on your financial year.
|Financial year beginning||What is the first reporting period||When must the first report be published on the web service|
|1st January||1st January 2018 to 30th June 2018||On or before 30th July 2018|
|1st April||1st April 2018 to 30th September 2018||On or before 30th October 2018|
|5th April||5th April 2018 to 4th October 2018||On or before 3rd November 2018|
|6th April||6th April to 5th October 2017||On or before 4th November 2017|
|After 6th April||First six months of the business’s 2017-18 financial year||Within 30 days starting on the day after the end of the business’s first reporting period|
HOW WILL YOU REPORT THE INFORMATION?
One the data has been extracted, it will then need to be inputted into the web-based government portal within the required 30 days after the reporting period.
We know from our experience of dealing with construction companies implementing ERP software, that even this kind of basic financial information can be time consuming to compile, and a big pull on resources.
With our 4PS Construct product, based on Microsoft Dynamics NAV, this kind of information can be compiled quickly and easily in a standard report, that can be run when required, and provide all information within minutes.
Thankfully as you don’t need to report until at least May, this gives you enough opportunity to be able to start looking at finance systems that will make this reporting far more efficient. Now could be an ideal time to look at a fully integrated ERP system, that is developed specifically for construction businesses.
If this is something you would like us to advise, or help you with, please don’t hesitate to contact me at email@example.com
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