SMEs express doubts on payment terms proposal

While supportive of the idea of regulated payment terms, SME owners have expressed a range of frustrations around a proposal to regulate payment terms.

The comments follow reports that Greens senator Nick McKim has drafted a bill for federal Parliament that would see 30-day payment terms become mandated for a raft of businesses.

What constitutes 30 days?

One area open to interpretation is on what actually constitutes the 30-day period.

“Would this bring in 30 days from invoice date or just enforcing the 30 days end-of-month terms most businesses run by?” asks reader Neil.

Why limit scope of the law?

Another reader, going by the name TRC, questions the validity of limiting the legislation to only cover businesses with turnover above $25 million making payments to those with turnover below $10 million.

“This is a brilliant idea, however why do they think it is only big business that pay way outside the normal 30-day period? Often it is other SMEs or medium size businesses that also are delinquent in paying on time,” TRC. says.

“This culture of ‘We will pay when we get paid’ is part of the problem. Every order received is a contract with terms and conditions applied. Currently the only way to get satisfaction is to take the customer to court, which often is not worth it.”

The reader says rather than limit regulation to businesses of a particular size, it should be made applicable to businesses of all sizes to ensure that a 30-day payment period becomes the norm regardless of size.

“The only way for this to happen is for the federal and state governments to start a new agency responsible to monitor and force this new legislation on everyone. Complaints are submitted and the agency issues a letter of demand with serious repercussions if ignored.

“The agency could even charge a small fee per complaint and any fines applied go back to paying for the agency. Something has to be done sooner rather than later.”

Definition of paid also in doubt

Another reader cited one customer which changed the definition of “paid” to suit itself, effectively circumventing the 30-day period.

“They used to routinely consider an invoice paid when it was released after 30 days to India for payment. It would then take 10 days to actually arrive into our bank account. Now it is just a 45-day term,” reader Dennis commented.

Dennis added “and this is one of the 32 companies in the article”, referring to the 32 large corporations which signed up to the new Australian Supplier Payment Code unveiled by the Business Council of Australia.

 

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