... FSB Northern Ireland Region Prompt Payment Report

Transcription

1 FSB Northern Ireland Region Prompt Payment Report June 2016

2 Contents Foreword... 3 Executive summary... 4 Summary of Recommendations... 5 Introduction... 6 Small business in Northern Ireland... 7 What role does small business play in the Northern Ireland economy?... 7 Table 1: Location of businesses by Council area... 7 Local Government... 9 Who decides the standards to which Councils are expected to perform?... 9 Who checks whether Councils perform to these standards?... 9 Council Performance: Quarter by Quarter Table 2: Local Government Prompt Payment Performance 2015/16: Quarter Table 3: Local Government Prompt Payment Performance 2015/16: Quarter Table 4: Local Government Prompt Payment Performance 2015/16: Quarter Table 5: Local Government Prompt Payment Performance 2015/16: Quarter Comparative annual performance Table 6: Performance within 10 working Table 7: Performance within Next steps Conclusion... 24

3 Foreword In a recent survey conducted by FSB with the Ulster Business School, cashflow and getting paid were cited by almost half of all respondents as the biggest obstacles impacting on their business success 1. Given the predominance of small businesses within the Northern Ireland economy, comprising 99% of the private sector, it is essential that government at all levels acts in ways that encourage and sustain these firms. The Review of Public Administration presented an opportunity for the 11 newly formed Councils to demonstrate how they would use their new local economic development powers to support small businesses within their areas. In my 15 years as Regional Chair of FSB, I have yet to meet an elected representative or public official whose stated aim was to damage, threaten or undermine small businesses: all of their strategies, policies and public statements will tell you of their desire to support local economic development. There is, however, no avoiding the fact that the poor practice uncovered in this report is stifling local firms, and the good intentions of Councils can no longer be allowed to provide cover for unacceptable actions. This paper summarises the performance of local Councils in meeting their targets for paying their suppliers promptly, identifying clear areas for improvement and recognising good practice where it exists. Failure to pay a business promptly impacts on cashflow, potentially inhibiting growth and development and, at worst, threatening their survival. Difficulties in accessing commercial finance increase the need for businesses to be paid promptly, to reduce reliance on borrowing in order to sustain cashflow. But the bottom line for us is that these figures measure the performance of Councils from a point when a valid invoice is received for processing: after the business has used its own resources to provide a product or service and until they are rightly paid for that work. By failing to pay their suppliers promptly, small businesses, who can ill-afford to do so, are providing interest free credit to Councils, who frankly don t need it. It doesn t benefit a Council in any way to hold off on paying their suppliers promptly, but it can be hugely damaging to the financial viability of small businesses across the Region. Having uncovered the scale of this issue, we hope that Councils across Northern Ireland will commit to working with FSB to improve their performance, demonstrating their own ongoing commitment to supporting smaller businesses to survive and thrive. John Friel FSB Northern Ireland Regional Chair 1 3

4 Executive summary In 2015/16, Councils paid 282,249 invoices worth 634,648, On average, only 46% of these invoices were paid within 10 working, against a target of 90%. Prompt payment performance has deteriorated throughout 2015/16, from an average of 54% of invoices paid within 10 working in April-June 2015, to 46% in January-March The best performance against the 10 working day target for invoice processing was in Belfast City Council, where they paid 72% against a target of 90% on time. The best performance against the 30 day target for invoice processing was in Mid Ulster Council, where they paid 99% against a target of 100% on time. The worst performance against the 10 working day target for invoice processing was in Newry, Mourne and Down District Council, where they paid 8% against a target of 90% on time. The worst performance against the 30 day target for invoice processing was in Ards and North Down Council, where they paid 63% against a target of 100% on time. 2 Figures derived from former Department of Environment publications archived at 4

5 Summary of Recommendations Recommendation 1: The Department for Communities should review Local Government Circular 17/2013 and include additional reporting requirements incorporating: number of invoices received; value of invoices received; and number of invoices disputed. Recommendation 2: The Northern Ireland Local Government Auditor should place greater emphasis on the performance of Councils in paying their suppliers in a timely manner and, having identified underperformance, include recommendations for improvement. Recommendation 3: The Department for Communities should request that all Councils publish their prompt performance data on their own websites on a quarterly basis, inviting them to include commentary where they consider it might enhance openness and transparency. Recommendation 4: All Councils to review internal payment processing systems and include recommendations for improvement within Performance Improvement frameworks. 5

6 Introduction The Federation of Small Businesses (FSB) is the largest business organisation in Northern Ireland, representing over 6,000 business owners who collectively own approximately 10,000 businesses. As experts in business, we offer our members a wide range of vital business services including advice, financial expertise, support and a powerful voice in government. Our mission is to help smaller businesses achieve their ambitions. Established here over 30 years ago to help our members succeed in business, we are a non-profit making and nonparty political organisation, led by our members, for our members. As well as providing an exclusive package of business services for our members, we are also the leading business campaigner across the UK, focused on delivering change which supports smaller businesses to grow and succeed. This Report was commissioned by our Regional Committee in Northern Ireland, which represents members from each of our five Branches: Western, North East, South East, Belfast City and Belfast South. Together they represent the views and interests of our members in every part of the Region. In developing this paper, we explored available data and consulted members to analyse and understand the impact of poor performance in payment practice on their businesses. Our aim in this Report is to inform and influence decision makers, predominantly but not exclusively within local government, to exercise their functions in a manner consistent with their commitments to support small businesses to survive and thrive within their local areas. 6

7 Small business in Northern Ireland What role does small business play in the Northern Ireland economy? In Northern Ireland, there are approximately 118,000 small businesses 3 : a figure incorporating everything from sole operators to businesses employing up to 249 people. Research conducted by the Ulster Business School at Ulster University with FSB, published in 2015, demonstrated that those businesses provide 75% of the employment, 75% of the turnover, and 81% of the GVA in Northern Ireland s private sector. Together, small businesses in Northern Ireland employ over 386,000 staff: more than the rest of the private sector, and the entire public sector, combined. In 2014/15, 80% of these businesses expressed an intention to grow, demonstrating the critical contribution they will make to economic stability and, indeed, prosperity under the right conditions 4. Focussing on the 68,095 businesses that are registered for VAT and/or PAYE purposes, i.e. those businesses with a turnover exceeding 81,000 or who employ staff, the locational breakdown by Council area is as follows 5 : Table 1: Location of businesses by Council area Number of businesses Council Area 2015 % of NI Belfast 9, Mid Ulster 7, Armagh, Banbridge & Craigavon 7, Newry, Mourne & Down 7, Fermanagh & Omagh 7, Causeway Coast & Glens 5, Lisburn & Castlereagh City 4, Derry City & Strabane 4, Mid & East Antrim 4, Ards & North Down 4, Antrim & Newtownabbey 3, Unknown district 1, Northern Ireland 68, R%20Publication%202015_0.pdf 7

8 In every Council area, more than 99% of these businesses are small businesses, with 76% employing between 1 and 4 staff. 68% employ people from their local area, and 95% have no intention to relocate outside that area. 8

9 Local Government Who decides the standards to which Councils are expected to perform? Local Government Circular 17/ provides guidance to all Councils as to how to measure and report upon their prompt payment performance. This guidance, issued in October 2013 by the then Department of the Environment 7, encourages all Councils in Northern Ireland to: pay suppliers as promptly as possible and to endeavour to meet the 10 day prompt payment commitment made by the Northern Ireland Executive in response to the current economic position. The stated reason for the Executive s adoption of this policy is to speed up cash flow from the public sector to its suppliers, particularly SMEs. 8 The target for achieving this is payment of 90% of valid invoices within 10 working. In addition, Public Sector organisations are bound by the Late Payment of Commercial Debts (Interest) Act 1988 (as amended by the Late Payment of Commercial Debt Regulations 2002 (SI 1674) and Late Payment of Commercial Debt Regulations 2013 (SI 395). This requires payment of valid invoices within 30. There are, therefore, two standards against which Council performance is measured: 90% within 10 working, and essentially 100% within 30. Who checks whether Councils perform to these standards? To demonstrate their adherence to this policy, Councils are asked to include notes in their accounts of their payment terms and, as well as keeping their performance under continual review, to report to the Department for Communities (DfC) on a three monthly basis as follows: 6 ni.gov.uk/sites/default/files/publications/doe/lg further-guidance-on-prompt-paymentpolicy-for-district-councils.pdf 7 Responsibility now transferred to Department for Communities 8 ni.gov.uk/sites/default/files/publications/doe/lg further-guidance-on-prompt-paymentpolicy-for-district-councils.pdf 9

10 Council name: [insert name] The default target for paying invoices, where no other terms are agreed, is xx. N.B. 30 target is 30 and 10 is 10 working. During the year the Council paid xx invoices totalling xx. The Council paid xx invoices within the 30 day target. The Council paid xx invoices within the 10 day target. The Council paid xx invoices outside of the 30 day target. A summary of these figures is prepared each quarter by the DfC. No comparative data nor analysis is included, with each quarter s figures simply published online under the following headings: District Council Total no. of invoices paid Total amount paid ( ) within 10 working within 10 working within 30 within 30 outside 30 outside 30 The measurement of performance must be done in accordance with the following formula: (a/b) multiplied by 100 where a = number of invoices for commercial goods and services paid within X of receipt of a valid invoice (where X is 30 or 10 working ) and; b = total number of valid invoices. Thus the publicly available data outline performance against the Executive s 10 working day target, designed to speed up payment to small businesses, and the broader public sector target of 30, derived from obligations under the Late Payment of Commercial Debts (Interest Act) The published data do not include the total number and value of invoices received by the Council within the reporting period, nor the number that are disputed, and, given that each quarter s figures are published separately, do not provide sufficient information to understand whether those paid within that period relate to work completed in that same time. Recommendation 1: The Department for Communities should review Local Government Circular 17/2013 and include additional reporting requirements incorporating: number of invoices received; value of invoices received; and number of invoices disputed. 9 tents as amended by ents/made 10

11 The Local Government Auditor also prepares and publishes Annual Reports on Council performance using a range of measures, including prompt payment of their suppliers. In 2014, she noted that: Central government bodies significantly outperform councils in complying with the 30 day target. 10 In the most recent report, published in 2015, she again observed that at council level: performance continues to fall short of central government bodies. 11 Recommendation 2: The Northern Ireland Local Government Auditor should place greater emphasis on the performance of Councils in paying their suppliers in a timely manner and, having identified underperformance, include recommendations for improvement. Whilst the DfC publishes these figures on a quarterly basis, some Councils also make this information available on their own websites. This approach is more consistent with the principle of openness and transparency, and could also be used as a platform for Councillors to demonstrate how they are supporting small businesses in their purchasing decisions. Recommendation 3: The Department for Communities should request that all Councils publish their prompt payment data on their own websites on a quarterly basis, inviting them to include commentary where they consider it might enhance openness and transparency t_audit_report_2014.pdf 11 ovanlrprt_final.pdf 11

12 Council Performance: Quarter by Quarter The following tables, prepared by the former Department of Environment, outline the performance of each of the 11 Councils across each quarter of the financial year. The Councils, which are listed alphabetically in tables 2-5, self-report this data. The only additional information added to these tables is the average value column, which is a straight calculation of the total value of invoices paid divided by the total number paid within that period, to illustrate the amounts of money typically owing to suppliers. A short analysis of each quarter s data is also provided. 12

13 Table 2: Local Government Prompt Payment Performance 2015/16: Quarter 1, April June 2015 Council Antrim & Newtownabbey Ards and North Down Armagh, Banbridge & Craigavon Belfast Causeway Coast and Glens Derry City and Strabane Fermanagh and Omagh Lisburn and Castlereagh Mid and East Antrim Total no. of invoices paid Total amount paid Average value within 10 working April - June 2015 within 10 working within 30 within 30 outside 30 outside 30 5,506 12,264,663 2,228 3,836 70% 4,921 89% % 4,965 24,430,192 4,920 1,579 32% 2,996 60% 1,969 40% 2,981 8,076,011 2, % 1,246 42% 1,735 58% 13,810 39,521,336 2,862 10,350 75% 11,744 85% 2,066 15% 3,667 6,607,314 1,802 1,870 51% 3,218 88% % 4,182 14,695,645 3,514 1,516 36% 3,263 78% % 3,806 5,875,751 1,544 2,079 55% 3,070 81% % 4,821 7,887,913 1,636 2,577 53% 4,297 89% % 5,346 10,738,152 2,009 3,130 59% 4,865 91% 481 9% Mid Ulster 3,466 7,761,097 2,239 2,637 76% 3,375 97% 91 3% Newry, Mourne and Down 2,527 4,062,678 1, % 1,126 45% 1,401 55% Northern Ireland 55, ,920,752 2,577 29,643 54% 44,121 80% 10,956 20% 13

14 Local Government Prompt Payment Performance 2015/16: Quarter 1, April June 2015 Analysis Number of Councils achieving 10 working day target: None Best performance against 10 working day target: Mid Ulster Council (76%) Worst performance against 10 working day target: Armagh City, Banbridge and Craigavon Council (0%) Number of Councils achieving 30 day target: None Best performance against 30 day target: Mid Ulster Council (97%) Worst performance against 30 day target: Armagh City, Banbridge and Craigavon Council (42%) No Council reported payment of 100% of invoices within 30, with only Mid and East Antrim and Mid Ulster Councils exceeding 90% within that period. Newry, Mourne and Down District and Armagh City, Banbridge and Craigavon Councils failed to even pay half of their suppliers within the 30 day target period. No Council met the target of paying 90% of their invoices within 10 working. The payment of only 2 invoices within 10 working in Armagh City, Banbridge and Craigavon Council area is particularly noteworthy, as it is the worst performance of any Council during any reporting period of the 2015/16 year, closely followed by Newry, Mourne and Down District Council who paid only 3% of its invoices within that timescale. 14

15 Table 3: Local Government Prompt Payment Performance 2015/16: Quarter 2, July September 2015 Council Antrim & Newtownabbey Ards and North Down Armagh, Banbridge & Craigavon Belfast Causeway Coast and Glens Derry City and Strabane Fermanagh and Omagh Lisburn and Castlereagh Mid and East Antrim Total no. of invoices paid Total amount paid Average value July - September 2015 within 10 working within 10 working within 30 within 30 outside 30 outside 30 4,997 14,260,431 2,854 1,174 23% 2,472 49% 2,525 51% 6,104 19,143,968 3,136 1,280 21% 2,998 49% 3,106 51% 5,442 10,542,310 1, % 3,372 62% 2,070 38% 14,858 46,449,870 3,126 11,118 75% 12,604 85% 2,254 15% 6,972 12,411,407 1,780 3,145 45% 5,622 81% 1,350 19% 6,786 19,007,563 2,801 1,954 29% 4,985 73% 1,801 27% 4,115 7,085,567 1,722 2,472 60% 3,394 82% % 5,543 7,480,272 1,350 2,461 44% 4,686 85% % 6,321 9,608,662 1,520 4,736 75% 5,524 87% % Mid Ulster 3,752 8,372,170 2,231 2,840 76% 3,710 99% 42 1% Newry, Mourne and Down 6,763 14,065,686 2, % 3,329 49% 3,434 51% Northern Ireland 71, ,427,906 2,351 31,835 44% 52,696 74% 18,957 26% 15

16 Local Government Prompt Payment Performance 2015/16: Quarter 2, July September 2015 Analysis Number of Councils achieving 10 working day target: None Best performance against 10 working day target: Mid Ulster Council (76%) Worst performance against 10 working day target: Armagh City, Banbridge and Craigavon Council (3%) Number of Councils achieving 30 day target: None Best performance against 30 day target: Mid Ulster Council (99%) Worst performance against 30 day target: Antrim and Newtownabbey Council (49%); Newry, Mourne and Down Council (49%); Ards and North Down Council (49%) For the second quarter, no Council reported payment of 100% of invoices within 30, with Mid Ulster Council the only Council to exceed 90% in their payment of suppliers within that timescale, and no Council meeting the 10 working day target. Furthermore, Armagh City, Banbridge and Craigavon Council is again the worst performing Council within 10 working, paying only 3% of invoices within this time. Whilst Newry, Mourne and Down District Council s performance has improved, its payment of 8% of invoices within 10 working was still well short of the 90% target. 16

17 Table 4: Local Government Prompt Payment Performance 2015/16: Quarter 3, October December 2015 Council Antrim & Newtownabbey Ards and North Down Armagh, Banbridge & Craigavon Belfast Causeway Coast and Glens Derry City and Strabane Fermanagh and Omagh Lisburn and Castlereagh Mid and East Antrim Total no. of invoices paid Total amount paid Average value October - December 2015 within 10 working within 10 working within 30 within 30 outside 30 outside 30 6,022 8,445,261 1,402 2,077 34% 3,510 58% % 5,415 10,339,877 1,909 1,920 35% 3,741 69% % 9,678 12,946,244 1,338 1,925 20% 7,757 80% % 17,057 64,619,497 3,788 11,525 68% 14,048 82% % 5,378 6,898,749 1,283 2,551 47% 4,439 83% % 6,247 19,091,510 3,056 2,189 35% 4,923 79% % 4,008 6,075,082 1,516 2,273 57% 3,446 86% % 5,940 7,885,229 1,327 2,473 42% 4,950 83% % 6,076 9,765,896 1,607 3,301 54% 5,215 86% % Mid Ulster 4,894 12,299,398 2,513 2,675 55% 4,840 99% 54 1% Newry, Mourne and Down 5,534 7,666,264 1, % 4,371 79% % Northern Ireland 76, ,033,007 2, ,493 44% 61,240 80% 15,009 20% 17

18 Local Government Prompt Payment Performance 2015/16: Quarter 3, October December 2015 Analysis Number of Councils achieving 10 working day target: None Best performance against 10 working day target: Belfast City Council (68%) Worst performance against 10 working day target: Newry, Mourne and Down District Council (11%) Number of Councils achieving 30 day target: None Best performance against 30 day target: Mid Ulster Council (99%) Worst performance against 30 day target: Antrim and Newtownabbey Council (58%) For the third quarter, no Council reported payment of 100% of invoices within 30, with Mid Ulster Council again being the only Council to have paid more than 90% of their suppliers within 30, and no Council meeting the 10 working day target. Despite improving performance against the previous quarter from Armagh City, Banbridge and Craigavon Council, its payment of only 20% of suppliers within 10 working is still well short of the 90% target, whilst Newry, Mourne and Down District Council was the worst performer on that measure, paying only 11% on time. Having fallen away from 89% in April-June 2015, Antrim and Newtownabbey Council was the worst performer within 30 in this quarter, paying only 58% of invoices on time, against a 100% target. 18

19 Table 5: Local Government Prompt Payment Performance 2015/16: Quarter 4, January March 2016 Council Antrim & Newtownabbey Ards and North Down Armagh, Banbridge & Craigavon Belfast Causeway Coast and Glens Derry City and Strabane Fermanagh and Omagh Lisburn and Castlereagh Mid and East Antrim Total no. of invoices paid Total amount paid Average value January - March 2016 within 10 working within 10 working within 30 within 30 outside 30 outside 30 7,099 15,580,752 2,195 4,348 61% 6,277 88% % 5,441 8,067,912 1,483 2,152 40% 3,996 73% 1,445 27% 6,931 7,298,107 1, % 5,281 76% 1,650 24% 16,098 46,651,359 2,898 11,247 70% 13,835 86% 2,263 14% 6,406 9,835,554 1,535 2,653 41% 5,124 80% 1,282 20% 8,448 17,151,789 2,030 3,390 40% 6,448 76% 2,034 24% 4,650 5,724,071 1,231 2,012 43% 3,990 86% % 5,752 9,534,469 1,658 2,693 47% 4,718 82% 1,034 18% 7,393 12,149,321 1,643 3,631 49% 6,313 85% 1,080 15% Mid Ulster 3,906 11,697,259 2,995 2,562 66% 3,860 99% 46 1% Newry, Mourne and Down 7,146 14,575,818 2, % 5,333 75% 1,529 21% Northern Ireland 79, ,266,411 1,997 36,138 46% 65,175 82% 13,845 17% 19

20 Local Government Prompt Payment Performance 2015/16: Quarter 4, January March 2016 Analysis Number of Councils achieving 10 working day target: None Best performance against 10 working day target: Belfast City Council (70%) Worst performance against 10 working day target: Newry, Mourne and Down District Council (7%) Number of Councils achieving 30 day target: None Best performance against 30 day target: Mid Ulster Council (99%) Worst performance against 30 day target: Ards and North Down Council (73%) For the fourth quarter, no Council reported payment of 100% of invoices within 30, with Mid Ulster Council the only Council to exceed payment of 90% of invoices within 30. Whilst no Council achieved the target of paying 90% of invoices within 10 working, for the third time Belfast City Council performed the strongest on this measure, paying 70% on time. Having achieved 11% in the previous quarter, Newry, Mourne and Down District Council was the worst performer within 10 working, paying only 7% of their invoices on time, against a target of 90%. Despite achieving their best quarterly performance against the 30 day target, Ards and North Down Council was the poorest performer this quarter compared to the other 10 Councils, paying only 73% of invoices against a target of 100%. 20

21 Comparative annual performance Having outlined the performance of Councils across each quarter of the financial year, the following tables summarise their annual performance, ranking them against the 10 working and 30 day targets. Table 6: Performance within 10 working Local Government Prompt Payment Performance 2015/16: Ranking by Council Area Council Total no. of invoices paid Total amount paid Average value within 10 working within 10 working Rank (10 working ) Belfast 61, ,242,062 3, ,240 72% 1 Mid Ulster 16,018 40,129,924 2, ,714 67% 2 Mid & East Antrim Fermanagh & Omagh Antrim & Newtownabbey Lisburn & Castlereagh Causeway Coast & Glens Derry City and Strabane Ards and North Down Armagh, Banbridge & Craigavon Newry, Mourne and Down 25,136 42,262,031 1, ,798 59% 3 16,579 24,760,471 1, ,836 53% 4 23,624 50,551,107 2, ,435 48% 5 22,056 32,787,883 1, ,204 46% 6 22,423 35,753,024 1, ,219 46% 7 25,663 69,946,507 2, ,049 35% 8 21,925 61,981,949 2, ,931 32% 9 25,032 38,862,672 1, ,000 12% 10 21,970 40,370,446 1, ,683 8% 11 Whilst Belfast City Council is the best performer against the 10 working day target, no Council has met the target of paying 90% of invoices within that period across the year. On average, only 39% of invoices were paid within 10 working. 21

22 Table 7: Performance within 30 Local Government Prompt Payment Performance 2015/16: Ranking by Council Area Council Total no. of invoices paid Total amount paid Average value within 30 within 30 Rank (30 ) Mid Ulster 16,018 40,129,924 2, ,785 99% 1 Mid & East Antrim 25,136 42,262,031 1, ,917 87% 2 Lisburn & Castlereagh 22,056 32,787,883 1, ,651 85% 3 Belfast 61, ,242,062 3, ,231 84% 4 Fermanagh & Omagh Causeway Coast & Glens Derry City & Strabane Antrim & Newtownabbey Armagh, Banbridge & Craigavon Newry, Mourne & Down Ards & North Down 16,579 24,760,471 1, ,900 84% 5 22,423 35,753,024 1, ,403 82% 6 25,663 69,946,507 2, ,619 76% 7 23,624 50,551,107 2, ,180 73% 8 25,032 38,862,672 1, ,656 71% 9 21,970 40,370,446 1, ,159 64% 10 21,925 61,981,949 2, ,731 63% 11 Whilst Mid Ulster Council is the best performer within the 30 day period, with an average of 99%, no Council actually reached the target of paying 100% of invoices on time. On average, only 79% of invoices were paid within 30 during the financial year. 22

23 Next steps Having considered the available data, it is clear that there is significant room for improvement in the performance of Councils in paying their suppliers on time. FSB believes that implementation of the recommendations within this paper will be the first step in repairing the confidence of businesses across Northern Ireland to enter into contracts with local government. Given the considerable disparity in performance across Council areas, there is a need for all Councils to review their internal systems and procedures, to identify potential bottlenecks or previously unidentified loopholes that lead to delays in payment processing. The outcomes of these internal reviews should form the baseline for a commitment within their Performance Improvement frameworks to measure, and improve, progress during the 2016/17 year. Recommendation 4: All Councils to review internal payment processing systems and include recommendations for improvement within Performance Improvement frameworks. 23

24 Conclusion FSB will continue to monitor and report on quarterly performance across local government in paying suppliers in a timely manner, and will encourage and promote best practice by including further recommendations for improvement. 24

25 Report prepared by: Mairaid McMahon Development Manager, Northern Ireland On behalf of: FSB Northern Ireland Regional Committee FSB Regional Office 7 Union Street Cookstown Co Tyrone Northern Ireland BT80 8NN Tel Mob mairaid.mcmahon@fsb.org.uk Web: June 2016