The Department for Business and Trade announced new measures on 2 October 2023 to address the late payment of commercial invoices. Having sufficient cash is the lifeblood of businesses, large and small, and ensuring prompt payment of invoices is key to business.

The measures include:

• extending the Reporting on Payment Practices and Performance Regulations 2017. These regulations require in-scope businesses to publish information about their payment practices. Broadly, this relates to companies and LLPs that meet two or more of the following three thresholds: (1) £36 million annual turnover, (2) £18 million balance sheet total; and (3) 250 employees. This will include new reporting metrics, including a value metric, so businesses, amongst others, can see the value of invoices, those that have been paid late and a disputed invoices metric.
• introducing legislation to enable the Small Business Commissioner to carry out investigations and publish reports where necessary, based on anonymous information and intelligence.
• providing greater advice to small businesses regarding negotiation of payment terms to better suit them, and on how going digital can help them get paid quicker and manage their cash flow.
• strengthening the Prompt Payment Code so that business which are signatories to it must reaffirm their commitment every two years to stay on it. The Prompt Payment Code is a voluntary code which enables companies and public bodies the ability to commit to paying suppliers on time.

Whilst these measures will be welcome news, they are no substitute for having a good set of Terms and Conditions relating to the supply of your goods and/or services.

Whilst the content of Terms and Conditions will differ depending on the subject matter of the service or goods involved, the duration and whether it is a B2B or B2C transaction, T&Cs will look to bring certainty to a transaction and will broadly, and amongst other things, deal with the following:

• detail on how and when you will deliver what has been promised
• what specific rights of redress the customer has if goods are faulty delivered late or services are poorly preformed
• limiting (as far as may be allowed) the contractual remedies available to your customer in certain circumstances
• when title (ownership) to any goods passes, enabling suppliers to retain title - and impose certain obligations with regard to the handling of the goods - until paid in full
• if appropriate, how the price is arrived at and when and how payment is to be made. Interest on late payment can be specifically stated to focus a customer’s attention on making payment on time although the Late Payment of Commercial Debts (Interest) Act 1998 serves to introduce statutory interest provisions into qualifying contracts
• scenarios that may entitle you to terminate your activities under the contract or to suspend deliveries or services
• limiting your liability under the contract if things go wrong or excluding certain types of losses from loss calculations. There are all sorts of rules surrounding this area but, as a business delivering goods or services, you'll want to limit your exposure as much as possible
• there may be circumstances totally outside your control that, if they happen, you will want to raise as being circumstances that entitle you to an extension of time for delivering under the contract, rather than allowing your customer to terminate for late delivery

The above is a very simple outline of what Terms and Conditions of supply can cover but they would need appropriate consideration depending on their subject matter and the sales route – for example, online T&Cs with consumers need many other aspects to be included.

The value of a good set of Terms and Conditions cannot be overestimated. To slightly adapt a well-known phrase, prevention is cheaper than a cure and to get a transaction with your terms of business in place will give enhanced peace of mind, not to mention avoiding the loss of valuable management time that would otherwise be spent in dealing with issues. Having a set of Terms and Conditions prepared for your business rather than borrowing a set from somewhere (which themselves may not be legally sound) will ensure that you know that the content of your terms are spot on for your business and you will understand them inside out.

And if and when you feel that your business is of a size where your custom (and you as a customer) has become important to your suppliers, such that they may entertain terms that you may want to try and impose upon them, you may want to consider having a set of terms and conditions of purchase...

So, it is good that the Government is looking to address the continued issue of late payment of commercial invoices. However, having a set of Terms and Conditions that can govern the supply of your goods and services will help to enhance remedies available to you as a supplying business and assist the robustness of your business practices and remedies available to you in the case of late payment.

If you would like to speak to Eaton Smith LLP about how we can assist your business through the preparation of bespoke Terms and Conditions, please do contact either Chris Taylor at christaylor@eatonsmith.co.uk or on 01484 821411 or John Cotterill at johncotterill@eatonsmith.co.uk or on 01484 821393.

The issues set out above are only intended to be indications of issues to consider and do not constitute legal advice. As they say, the "devil is in the detail" and this article is only a general outline of the issues that terms and conditions can deal with.