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Compliance

Payments times review welcomed, ombudsman says

by Kate Aubrey11 minute read

Treasury will examine how to get big business to pay their invoices in a “fair and reasonable” time, as small-business invoice times stretch to 33 days.

The independent review of the Payment Times Reporting Act 2020 (the Act), which commenced on 1 January 2021, aims to improve payment terms and practices for small businesses after recent data revealed small businesses are waiting up to four months to be paid for work.

According to data reported to the regulator, an analysis of 7,000 businesses, many with a turnover of more than $100 million, found that seven out of 10 big businesses failed to meet the 30-day payment goal set by the Business Council of Australia.

“We know what a difference better payment times can mean for small businesses to improve cashflow and provide more certainty for business planning,” Small Business Minister, Julie Collins, said.

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“While increased transparency has helped to shine a light on this issue, our Government is committed to investigating the issues around late payment times to small business.”

Under the Act, large businesses and government enterprises (known as reporting entities) must submit information on their payment terms and actual payment performance for small businesses to the Payment Times Reporting Regulator in Treasury every six months.

These ‘payment times reports’ are subsequently published and made publicly accessible on the Payment Times Reporting scheme website.

By making the payment times public, big businesses are also incentivised to speed up their payments, encouraging more small businesses to offer their services.

But Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, said the register is not working.

“The Register that was designed to reveal those that aren’t doing what is reasonable and giving a fair go to their small business suppliers seems not to have changed behaviour,” Mr Billson said.

“I think this review is very timely and we might need a little bit more firmer guidance for those big businesses not doing the right thing by their small business suppliers.

“Big business must show leadership, respect and care for our small businesses and pay their bills on time. And for big business leaders urging support for small business ‘doing it tough’, a practical and achievable measure is to get serious about improving payment performance to small business.”

The review will be led by former labor minister Craig Emerson, in a bid to ensure the country’s 2.5 million small businesses are paid on time and will consider the “efficacy of the Act in meeting its objectives”, the impact of related government policies on the payment terms, and the “effectiveness of other policy measures”.

Ms Collins said the government is “cracking down on unfair contracts, updating Commonwealth Procurement Rules and helping improve digital outcomes”.

“We know small business have had an incredibly difficult few years, so our Government is not wasting a day to deliver more,” Ms Collins said.

The review will be completed in the first half of 2023 and will include public consultation.

[Related: ASBFEO calls for interest free finance options for disaster struck SMEs]

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