The late payment of suppliers by large organisations in the UK has been under the microscope for some time.
The Housing Association (HA) sector appears to be painted as a hero by Government statistics. Reports from the 16 HA’s reporting indicate better than average performance against all other sectors combined.
However, as many HA’s have not reported, this small sample makes it difficult to conclude a full picture of the true performance. So the question remains open, are they the hero or the villain?
The requirement to report
The government statistics arising from reporting in the Payment Practices and Performance Regulation 2017 led to a requirement for large organisations (that are Companies or LLP’s) to report from November 2017 their payment processes. Large organisations are considered to be those that exceed two of the following three thresholds: £36m annual turnover; £18m balance sheet total; 250 employees.
Each organisation is required to report within one month for each six month period following its year-end, the most popular year-end for HA’s tending to be 31 March. This results in reports for the six months to September by 31 October and for the six months to March by 30 April each year.
Of the 1650 HA’s in the UK, many are Registered Societies, not Companies or LLP’s, and would appear are not required to report.
For any that have a Company number under the Companies act 2006 that have failed to report, it is worth noting that the legislation identifies this as a criminal offence and can result in a fine of up to £5,000 for the organisation and individually for each of its directors.
Better than average performance from those reporting
The few that have reported show better performance than the average of all sectors.
These statistics suggest that a HA supplier will be more likely to be paid more quickly, receive fewer late payments (trading terms will be complied with more frequently), and be asked to offer lower extended payment terms. This would suggest that suppliers to HA’s should be happier with their payment practices than other sectors. Can they claim to be heroes in this context?
Representative of the Sector?
These statistics provide an interesting benchmark for the HA’s that have not reported.
The first question would be whether those associations can readily produce these statistics for their own operation. There are examples from companies who have failed to report, like Patisserie Valerie plc, where it has been identified they couldn’t produce these statistics because they were not clear on how payments matched up to their invoices.
The consequences in Patisserie Valerie’s case were fatal. Any board members of HA’s who cannot readily produce these statistics should be concerned about the efficiency, visibility and control of their financial processes.
If the association is able to produce these statistics, it should be able to benchmark against those reporting above. If it falls short of this benchmark, or one it expects to meet, then it should examine the causes.
Although many HA’s do not have to provide their payment practices required by the reporting on Payment Practices and Performance Regulations 2017, this issue should not be off their agenda.
The limited evidence available from those 16 HA’s reporting suggests that HA’s can be the heroes rather than the villains.
That said, there is still much room for improvement as paying almost 27% of supplier invoices late doesn’t sound too much like a hero.
One of the elements of being a payment practices hero is having the systems in place to be able to process supplier invoices efficiently with visibility and control over the whole process. This, therefore, enables the reporting of payment practices and performance on a timely basis.