NEW PAYMENT PRACTICE REPORTING OBLIGATION COMES INTO FORCE ON THURSDAY

Tony Duggan, CEO of Crossflow Payments, comments on the new obligation requiring large businesses to publicly report on their payment practices to suppliers:

“This is a big stick from the Government to drive up standards in payment practices after years of concerns about large businesses using their bargaining power to pay suppliers late knowing they will face no consequences. But big sticks are more effective if people know they are there, and we think that this new obligation is not sufficiently well known about or understood.

“Many businesses will have to make their first report as early as November and failure to report or inaccurate reports will be a criminal offence.

Businesses able to improve working capital while supporting suppliers 

“An increasing number of large businesses are finding ways to improve their working capital, while ensuring suppliers can receive payment immediately – thereby benefiting themselves and their suppliers. This is possible through sophisticated supply chain finance solutions. Solutions like these are tacitly recognised by the requirement to report whether a supply chain finance solution in place, so this is important step forward.

Missed opportunity

“However, the government has missed a golden opportunity to recognise the benefits of supply chain finance. This is because the dates business have to record does not take into account the date on which funds are released if a supply chain finance solution is in place.

“The result will be that the data the government collects will paint a false picture of the relationship between corporates who have implemented a supply chain finance solution and their suppliers. Even if a supplier accesses outstanding payments instantly using supply chain finance to invest, hire and grow, the report by the corporate will make it look like they had to wait for the full term of the payment.

“This cannot be right and we hope to persuade the government to change the reporting obligation to recognise corporates’ efforts to support their suppliers with supply chain finance.”

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