As of 6 April 2017, businesses that meet certain criteria will be required, under Section 3 of the Small Business, Enterprise, and Employment Act 2015 and the Limited Liability Partnership Act 2000, to report their payment practices, policies and performance on a half-yearly basis to the UK government.
In order to help those businesses affected by this legislation, Microsoft Dynamics GP's 2017 Mid-Year update for Dynamics GP 2013, 2015 and 2016 includes a new field titled Invoice Receipt Date. This new field will allow businesses using GP to accurately meet the requirements outlined by the Department for Business, Energy & Industrial Strategy.
Is my business affected?
It depends. While the reporting requirements apply to companies and LLPs regardless of whether they are private, public or quoted, businesses need to meet certain thresholds in order to be considered a 'qualifying company' or 'qualifying LLP'. The thresholds focus on turnover, balance sheet total and the average number of employees. Businesses need to meet at least two of the thresholds in order to be considered a 'qualifying company or LLP', these are:
- £36 million annual turnover
- £18 million balance sheet total
- 250 employees
What needs to be reported?
Those businesses that meet at least two of the above thresholds will need to report on their payment practices and performance in relation to qualifying contracts for each reporting period in the financial year. The report must be submitted to a web-based service, provided by the government, within 30 days of the end of the reporting period and must be approved by a named company director, or (for LLPs) a designated member.
A qualifying contract is defined as an agreement between two or more parties that is intended to be legally binding. Please be aware that a contract does not have to be written for it to be considered legal, therefore a qualifying contract can be written, verbal or both.
Failure to comply, or providing false information is a criminal offence, punishable on summary conviction by a fine.
Some of the information that businesses are required to report on includes:
- The business' standard payment terms, including length of time for payment of invoices, maximum contractual payment period and changes to standard payment terms in the reporting period, as well as how suppliers are notified or consulted on these changes
- The businesses' process for resolving disputes related to payments
- Average number of days taken to make payments in the reporting period, from date of receipt of invoice to other notices
- Percentage of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer
- Percentage of payments due within the reporting period which were not paid within the agreed terms
Please note that the above is only a summary of the full requirements, for more detailed guidance on reporting payment practices and performance click here.
How does Dynamics GP's new update help me comply with the payment practices and performance legislation?
GP's new update allows you to track the date the invoice was received against both Payables Management and Purchase Order Processing invoices; in previous versions, you were unable to do this. Reports can then be created which show 'received and payment dates,' allowing for analysis of days to pay.
For more information on how Microsoft Dynamics GP can help you stay up-to-date with new and existing UK payment legislation, contact Advantage today.
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Words by Camilo Lascano Tribin