The UK government has always been more sensitive to its large companies’ (late) payment practices than US authorities have to theirs.  Perhaps this is simply another example of the Brits being more civilized than Americans.  More likely, it relates to the UK’s highly concentrated retail grocery industry and that industry’s leverage over small suppliers.

The UK Reporting on Payment Practices and Performance Regulation

In response to perceived late payment abuses, in 2017 the UK government put in place regulations requiring “large” businesses to publicly disclose information on their payment practices.  Payment practices which must be reported include:

  • Standard and maximum payment terms
  • Whether e-invoicing or supply chain finance is offered to suppliers
  • Statistics on payment performance:
    • Average number of days taken to make payments
    • The percentage of payments made with 30 days, 31-60 days, and 61+ days
    • The percentage of payments due that were not paid upon agreed upon terms

The good news for us nerds is that this (normally difficult to come by) data are now trickling in. You can find the data here.

Caveats To The UK Payment Practices and Performance Regulation Data

There is some critical information you need to know about the data before analyzing it:

1.  Only UK companies that meet two of the following three requirements must publish their payment practices data:

  • Annual Revenue of £36 million
  • Balance sheet total of £18 million
  • 250 employees

2. The regulations apply to all companies and LLPs in the UK individually, so subsidiaries of the same corporation report separately. If you want to look at companies at the group level, you will have to join the data with a hierarchical identifier (e.g., Duns Number).

3.  Only about 600 entities have reported so far. The reporting requirements are still rolling into effect.  Many more corporations are due to report by July 2018.   Also, compliance, which seems poor so far, (see here) should improve.

4.  We have not cleaned the data or joined it with any third-party data. (It’s a free blog, not a Ph.D. thesis.)

Even with these limitations, the data is fascinating and fun to play with.  So that’s exactly what I and Peter Lugli of Digital Pylon did.  Peter is a former colleague from Ariba, a veteran of  Quadrem, Prime Revenue, Amazon Business, and Mastercard.  He also invented AribaPay.  In short, he knows late payments.  Or in the case of this work, no payments!

What the UK Payment Practices Data Shows

1.  The average, unweighted time to pay across all reporting entities is approximately 45 days.

2.  About 49% of invoices are paid within 30 days, 35% of invoices are paid within 31-60 days, and 16% are paid in 61+ days.

3.  About 31% of all invoices are not paid within the agreed upon terms. This proves the “Golden Rule”: “He with the gold rules.” (Note, again, these data are not dollar-weighted, so the agony of the supplier may be even greater!)

4.  Just 26% percent of the companies offer e-invoicing, which shows how slowly that service has been to grow in the UK (and elsewhere). Interestingly, those companies offering e-invoicing have an average time to payment of 42 days, while those do not offer e-invoicing pay in an average of 46 days.  This is consistent with data I have seen before.   It also supports the notion of a modest charge to suppliers for e-invoicing.

5.  Only about 5% of the companies reporting offer supply chain finance (SCF). (Companies with such programs include units of Procter and Gamble, Diageo, and General Mills).  This low penetration rate fits our knowledge of that product as well.

6.  Not surprisingly, the average time to pay for companies with SCF programs is 63 days, or 20 days longer than those without SCF programs.  Many SCF programs paradoxically begin with an extension of payment terms. It’s a bit like someone lighting your house on fire and then selling you a fire extinguisher.

7.  Finally, it is good to be a supplier to the English Premier League. Members of the UK’s fabled sports league pay faster than the average UK company.  Here’s the UK Premier League Standings Table based on average time to pay:

English Premier League Payment Practices

TeamAverage Time to Pay (Days)
Bournemouth16
Manchester United21
Manchester City25
Liverpool27
Reading30
Watford33
Arsenal35
Everton36
Southampton40
Fulham42
Norwich City42
Blackburn Rovers50

Interestingly, the average time to pay seems to correlate fairly well with results on the field; the better teams tend to pay faster!  Bournemouth, however, scores much better by this measure than it does on the field.

Future Work

As more data becomes available in July, we may cut the data by size of company, industry, and compare it to third-party data from other countries.

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