Bupa Insurance Services poor payment practices have been exposed in a new report by The Office of the Small Business Commissioner.

The reports names Bupa for failing to pay adequate compensation to a small business in a case of late payment of invoices, following an investigation into a complaint.

The small business commissioner found that after a supplier’s invoice was settled 75 days late by the healthcare group and that it failed to provide statutory late payment interest to the company. Suppliers are legally entitled to charge 8 per cent over the Bank of England base rate when commercial customers do not pay their bills on time, but Bupa attempted to sidestepped this via a clause in their contract.

The complaint was brought to the Small Business Commissioner by Blacklight Advisory Services. The company submitted an invoice for £29,403.76 on 2 November 2018 based on 45-day end of month payment terms, but was not paid on the due date of 15 January 2019 despite chasing on numerous occasions.

A report on the case said Bupa Insurance Services responded positively to the commissioner’s investigation, immediately approving and releasing the overdue payment which was made 15 days outside of the contracted terms. However, the payment was made after 75 days of receipt of invoice.

Bupa claimed the late payment took place “due to staffing inefficiencies” but this was never relayed to Blacklight, according to the report. The commissioner’s investigation found that Blacklight was “continually misled and reassured” by Bupa’s finance director and revealed that pay delays were “commonplace” at the company.

However, the report noted that Blacklight had submitted its invoice based on procedural instructions provided by the relevant directorate whilst being reassured on several occasions that the invoice had been received and authorised.

Bupa Insurance Services recognised that it did not meet the agreed contractual payment terms, and acknowledged the late payment by offering a claim for late payment interest at 2% above the Bank of England base rate for the value of the invoice.

The report pointed out that the Late Payment of Commercial Debts (Interest) Act 1998 sets a statutory value of 8% above the Bank of England Base Rate for interest that is chargeable on late paid debts. The Act also sets compensation to be charged at statutory defined levels dependent on the value of the debt. £40 for debts up to £1000, £70 for debts between £1000 and £10,000 and £100 for debts over £10,000. With each invoice being deemed to be a separate debt. In this case the statutory compensation would have been £100.

Parties can agree to alternative terms contractually, but there must be a “substantial remedy” for late payment and therefore big businesses cannot impose derisory terms largely below those set in statute. The contractual terms would have to be substantial.

The commissioner did not consider the variation to 6% below the value defined in the legislation a considerable remedy or deterrent for late payment.

Bupa Insurance Services stated that it offers preferential 30-day payment terms to small businesses, but the investigation found this policy was implemented after commencement of the complainant’s contract. Blacklight requested a variation in payment terms to 30 days, but this was rejected and it was held to the original agreement.

Paul Uppal, Small Business Commissioner, said: “I am witnessing variations from the statutory defined value of late payment more frequently in contractual agreements. It seems that small businesses are being pressured into accepting these terms if they wish to supply large businesses as part of standard framework agreements.”

“A substantial remedy for late payment should be substantial. It should adequately compensate the small business for impacted cash flow, and any additional resources required to chase outstanding invoices.cThe remedy should also act as an incentive to ensure payment is made on time. I do not consider a contractually agreed variation of late payment charges at 2% above the Bank of England Base rate from a global company sufficient.”

The report made specific recommendations for BUPA, which include setting out the agreed remedy in standard framework contracts; agreeing the value of the remedy after considering the bargaining position of the small business, effect of late payment on the small business, commercial certainty and benefits of being a supplier; increasing transparency by promoting its preferential payment terms to its small business supply chain; and offering small businesses 30-day payment terms as standard.

Peter Lock, Procurement Director at Bupa Insurance Services, said: “On this occasion, due to a number of issues, including that unfortunately Blacklight did not follow the recommended process and submitted their invoice incorrectly, we have not met our contracted payment terms and would therefore be liable to pay late payment interest in line with our contract with Blacklight. We have already communicated this to Blacklight directly.”

Andy Lyon, Partner at Blacklight Advisory, said: “Throughout the life of the contract we endured issues with payments which greatly disrupted our advisory business. Bupa failed to provide us with any recommended processes to follow and the lack of accountability for the mistakes they have made shows little regard or empathy for small businesses.”

The Office of the Small Business Commissioner (SBC) was launched in December 2017 to ensure fair payment practices for Britain’s small businesses, and support them in resolving their payment disputes with larger businesses and bring about culture change.

The full report can be viewed here.