More than 700 large companies have now filed information about their supplier payment practices under the new UK Duty to Report regulations. They reveal that companies with supply chain finance programmes in place are more likely to be slow payers, with longer payment terms, but ae also more likely to pay late, beyond the agreed terms.
The rules came into effect in April last year and the first filings were submitted in early November. They require companies to reveal their average time to pay suppliers, the percentage of invoices that are paid within 30 days, within 60 days and over 60 days, and the percentage of invoices that are paid outside of agreed terms.
The rules also require companies to say whether they are signatories to a payment code, whether they offer e-invoicing and whether they offer supply chain finance.
Analysis by SCFBriefing.com reveals that, of the 702 companies that had filed by 23 February last week, only 34 – 4.8% – offer supply chain finance to their suppliers.
E-invoicing is offered by just over a quarter (26.2%) of companies that have filed so far. Somewhat surprisingly, eight companies offer SCF but not e-invoicing.
The average time to pay suppliers is 39.7 days, but the range for standard payment periods is from an average of 24 days up to 69 days. (These figures and others in this analysis exclude three related businesses where payment terms are nominally listed as 1,000 days because the only payments are intragroup.)
Companies that offer SCF typically have considerably longer payment terms than those that don’t. Their payment terms average 61.8 days while companies that do not have SCF programmes average payment terms of 38.4 days.
More surprising is the fact that companies with SCF are also slightly more likely to be late payers: 35.4% of the invoices of such companies are not paid within the agreed terms, compared with 30.9% of invoices at companies that do not have supply chain finance in place.
Companies that have an e-invoicing facility are slightly more likely to be on-time payers. While 31.7% of the invoices at companies without e-invoicing facilities have paid late, that figure falls only to 29.9% for those that do offer e-invoicing. Thirteen companies said that more than half their invoices are paid late.
The importance of reading the individual filings, however, is highlighted by the example of law firm Irwin Mitchell LLP, which amongst other things is a specialist in personal injury and medical negligence claims. Its filing says that the average time taken to pay invoices is 240 days, which makes it the slowest payer to have filed so far. But its detailed filing says that the firm has some contracts with “large medical suppliers in some legal cases where the agreed terms are for us to pay them when we receive payment or two years, whichever is earlier.” Moreover, there are agreements in place with some barristers and insurance companies who have agreed to be paid “only when the legal case has reached settlement”.
A dozen companies said that their payment terms had changed during the reporting period. While many had increased their payment terms, GE Oil & Gas Ltd reduced its payment terms to UK suppliers from 120 days to 90 in August last year.
Payment codes – any effect?
Only 57 of the companies that have filed so far (8.1%) say they participate in payment codes. The UK Prompt Payment Code (PPC) is administered by the Chartered Institute of Credit Management on behalf of the government’s Department for Business, Energy and Industrial Strategy (BEIS). Signatories to that code must commit to paying 95% of their invoices within 60 days.
However, the tickbox does not indicate adherence to the PPC: CHEP UK Ltd, for example, reports that 82% of its invoices are not paid within agreed terms but that it is a signatory to a payment code – the Brambles Code of Conduct which is set by its parent company.
Participation in a payment code seems to make little difference to the average payment days – 44.4 days for those that do participate in a payment code compared with 44.6 days for those that don’t. More worryingly, perhaps, those with a code are more likely to have invoices paid late than those that do not – 35.6% of invoices compared with 31.1%.