IoD calls for government to rank large firms’ payment practices, including public sector

Government should publish twice-yearly rankings of the speed at which large companies and public sector organisations pay supplier invoices, by volume and value, according to the IoD.

At present larger companies are required to notify government of their payment practices and the information is available to search on a government website. However, awareness of this service is low according to IoD data, it is complex to compare the performance of comparable organisations and government analysis shows the average time taken to pay has not budged in the last four years.

As part of their response to two government consultations that close today [28 April], the IoD proposes the following 10-point plan to tackle late payments:

  1. The government should publish twice-yearly rankings, by organisation, of the average time taken to pay invoices, as well as of the other payments statistics specified in the regulations.
  1. These ranking lists should be instantly visible on the gov.uk website, without requiring any downloading, filtering or analysis and be actively released to the media by the government, to raise awareness of the service and spur change by slower payers.
  1. The government should also publish an aggregate headline indicator of the average invoice payment time across all qualifying businesses, enabling policy makers to track progress and allowing the performance of individual firms to be compared to this average.
  1. Public sector entities employing over 250 people should be required to report their payment practices through the same system as private entities.
  1. As well as the proportion of invoices paid within specified time periods, organisations should also report on the proportion of outstanding amounts due by value for each time period, to prevent a false impression being given by firms paying smaller invoices faster than larger ones.
  1. Organisations covered by these regulations should be required to report on their payment practices in their statutory annual reports.
  1. The current Small Business Commissioner should have their remit extended to enable proactive investigations against any organisation that they suspect to be a slow payer and/or that they suspect is not compliant with the requirement to publish information around their payment practices.
  1. The name of the Small Business Commissioner should be changed to one that is more aligned to their role, such as ‘Late Payments Ombudsman’, to increase the impact of the role.
  1. The government should step up its enforcement activity against organisations that do not comply with the Regulations.
  1. Qualifying businesses should be given a reasonable lead-time before the first ranking is published, to give them time to consider the impact of this increased visibility on their business and make changes.

Kitty Ussher, Chief Economist at the Institute of Directors, said:

“The time taken to pay an invoice matters, which is why the government introduced a mechanism in 2017 to put firms’ payment practices into the public domain. The problem is that awareness of this service is low, and it is cumbersome to extract meaningful data. As a result, the average payment time has not changed since the regulations were introduced.

“Our proposals are designed to put greater public and reputational pressure on firms that take longer to pay, through a repackaging of the data that is already provided. This would spur change without suppliers needing to try and negotiate with their clients in isolation. We also see no reason why public sector bodies should be treated any differently to private sector organisations as far as visibility of payment practices are concerned.”