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IPA welcomes Govt’s new reporting requirement on payment practices

The IPA welcomes the proposed introduction of a new reporting requirement in the Small Business, Enterprise and Employment Bill, announced yesterday (25th June), as a sensible response to the issue of late payment. It also welcomes Government’s intention to consult further on the requirement prior to implementation.

26/06/2014

The IPA believes the key to its success will be a consideration of the entire sales-to-payment cycle and the ways in which payment may be delayed. It would also like to see the reporting framework adopted more broadly as a voluntary code of best practice on supplier payment.

IPA Finance Director Tom Lewis’s full reaction:

Payment terms are a commercial issue between client and supplier; however, our member agencies typically pay their staff at the end of the month, rent in advance and suppliers on 30 days, so managing cash flow - especially in smaller independents funded by retained earnings - is key.

There are a number of ways by which agencies can find their working capital stretched by even the most well-intentioned of clients.

Working capital challenges include:

• slow raising of purchase orders and / or approval of invoices
• unclear, undocumented, idiosyncratic invoice approval processes
• lack of clear lines of communication to establish invoice payment status
• understaffed accounts payable departments with limited contact details
• payment terms based on receipt of invoice rather than on invoice date
• limited payment runs in the month

In addition to this, suppliers bear the economic cost of regular debtor chasing and the fact that it is not uncommon for clients simply to pay routinely a few days late, something that is pretty much shrugged off as “just one of those things” by suppliers en masse.

The new reporting requirement on large and quoted businesses to report on their payment practices and performance, as set out in the Small Enterprise and Employment Bill, therefore needs to consider the entire sales-to-payment cycle and we welcome the government’s intention to consult further before the end of the year on the precise requirements of the new reporting framework. In anticipation of this Bill, we have already started shaping out the key criteria to be included.

In due course, we would like to see the reporting framework adopted more broadly as a voluntary code of best practice on supplier payment.

Ultimately, our member agencies want to be valued, trusted partners to their clients; all the anecdotal evidence shows that the best advertising is created when there is a trusting relationship between client and agency – ensuring agencies get paid promptly can only help with this.

Full details of all the measures in the Small Business, Enterprise and Employment Bill.

Last updated 26/06/2014


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