Can we extend our payment terms with suppliers?
At Lifecycle, this is a question we are asked a lot. With many (most) Trusts strapped for cash, the option of extending payment terms from 30 days to 60 days looks like an easy win in cashflow terms.
The answer is No
Trusts are now required by law to observe 30-day payment terms. Regulation 113 of the Public Contracts Regulations 2015 requires Contracting Authorities to pay undisputed invoices within 30 days. This is true for contractors and sub-contractors alike.
The full regulation is here: http://www.legislation.gov.uk/uksi/2015/102/regulation/113/made
Guidance can found here: https://www.gov.uk/guidance/prompt-payment-policy
Can we negotiate with suppliers?
Again, the unfortunate answer is No. The regulation is not a requirement to ensure the terms are agreed. Rather, it insists that all invoices are paid in 30 days. This is not a requirement that can be negotiated away, even with the agreement of the supplier.
Are there any exceptions?
Yes. Invoices related to delivery of healthcare services are excluded. Interestingly, this may open the door for Trusts to extend payment terms for contracts, such as MES, where VAT recoverability has been established on the basis that it is classed as delivery of a healthcare service.
Instances of late payment must be reported
Contracting Authorities are required (by Regulation 113(7)) to detail online their record in meeting the 30-day payment limit.
Cabinet Office reminding Trusts of their responsibilities
In recent months, the Cabinet Office’s Mystery Shopper service has received complaints by suppliers about Trusts attempting to impose, or negotiate, alternative payment terms. On each occasion, the Cabinet Office has written to the Trusts involved, reminding them of their obligations to ensure all suppliers are paid within 30 days, where an invoice is undisputed.