Senator Pauline Hanson-led One Nation has unveiled a policy that would see mandatory business payment terms enshrined in law, and stiff financial penalties for companies that break the rules.
In a statement issued on Tuesday (29 January), the party said that the lack of legislation around payment times is causing “immense financial pressure” on SMEs, limiting growth and leading to insolvency.
“Small and medium-sized businesses should not be used as a cheap source of finance through extended or late payment terms,” it said.
“Voluntary codes of conduct relating to payment terms are no longer acceptable as Australian banks and credit services tighten their lending criteria.”
As such, One Nation has proposed a Timely Payments policy, specifically aimed at what it labelled as “some of the largest offenders” — multinational companies, including miners, large supermarkets and transport companies.
“Modern electronic invoicing and online banking services provide no excuse for extended or late payment. Therefore, One Nation will put the needs of small and medium businesses first,” it said.
Under the proposal, laws would create a maximum mandatory payment term of no later than 30 days from the end of the month (unless mutually agreed in the supply contract from its outset).
Companies flouting the mandatory payment term would be forced to pay a fixed compensation sum plus reasonable costs and interest on the amount owed, with the interest rate set at 8 per cent plus the Reserve Bank’s base rate of interest (currently 1.5 per cent).
Furthermore, the party wants to:
• Introduce legislation forcing larger companies — multinationals as well as those listed on the ASX 100 — to publicly disclose all of their payment times to suppliers.
• Establish a National Payment Transparency Register of all ABN-registered businesses.
• Create small business workshops that facilitate electronic invoicing and other technologies to speed up the receipt of payments.
• Boost funding for government-operated debt dispute services.
“Australia has a healthy annual value of economic activity (GDP) worth more than $1.69 trillion dollars. Enforcing faster payment to businesses in the supply chain will yield increases in employment, security of employment and the greater prospect of wage growth as demonstrated in the United States,” One Nation said.
Indeed, payment times were identified as the biggest source of conflict for businesses, according to the Australian Small Business and Family Enterprise Ombudsman, which will soon release the results of its Payment Times Survey.
“The One Nation policy is well put together and well researched,” said Ombudsman Kate Carnell.
“A chunk of it is the recommendations that we’ve talked about in the past.”
Ms Carnell told My Business that the Business Council of Australia’s voluntary code had clearly not worked after a trial lasting more than 12 months, having failed to address the problem and eliciting some 80-odd signatories.
According to the ombudsman, other countries, including Germany, already have similar legislation in place to protect SMEs, and it is time for Australia to do the same.
“Australia has given big business a reasonable chance to step up to the mark and act on this and the majority of them haven’t,” she said.
Ms Carnell added that her office’s Payment Times Survey — which generated more than 3,000 responses — has already been delivered to Small Business Minister Michaelia Cash, who has been urged to publicly release the report as a matter of urgency.
She hopes One Nation’s move will spur the major parties to take more decisive action over payment terms.
The federal government announced in November plans to establish an annual reporting framework for companies with turnover greater than $100 million, and require those companies to match its pledged 20-day standard payment time frame (planned to take effect from 1 July this year) when tendering for government contracts.
It comes as a credit insurance brokerage revealed a substantial spike in the volume of business claims being lodged towards the end of 2018.
What businesses can learn from Sir Roger Bannister
By Adam Zuchetti
‘We had lost our way culturally’
By Adam Zuchetti
Ask the Experts: How can employers protect their own mental health?
By Adam Zuchetti