Small businesses have been invited to have their say on the draft Payment Times Reporting Framework legislation that will require businesses with turnover of over $100 million to publish information about their payment policies.
In a bid to ensure that the 3.4 million small businesses that underpin Australia’s economy get paid on time, the government is introducing new legislation that will require about 2,500 large Australian businesses, including foreign companies and government entities, to publish information on how fast they pay small businesses.
Minister for Employment, Skills, Small and Family Business, Senator the Hon Michaelia Cash said the new framework is essential to encourage fairer and faster payments for small and family businesses.
“Slow or deliberately delayed payment times have a significant impact on small business cash flow and viability. This will be a landmark reform which will encourage fairer and faster payment times for small businesses,” Minister Cash said.
“Big businesses pay their small business suppliers late more than 50 per cent of the time. There is simply no excuse for that.”
The framework is seen as an important step in driving cultural change in business payment performance across the entire economy.
“Australian small businesses should be able to expect a fair go and I encourage all big businesses to commit to paying on time,” Minister Cash said.
Businesses encouraged to have their say
Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell has urged small businesses to have their say on the draft law.
“Cash flow is king for small businesses and we welcome the federal government’s continued efforts to ensure they are paid on time,” Ms Carnell said.
“This framework will require big businesses to be upfront and honest about the time it takes to pay small businesses, to help small businesses choose who they supply.”
According to research undertaken by Xero, late payments by large businesses to small businesses account for 53 per cent of all invoices.
“That’s $7 billion of working capital that Australian small businesses are missing out on every year — money they could be using to grow their business.
“Small businesses can now provide their feedback on this proposed reform which is designed to drive cultural change in business payment performance across the economy.”
Consultation on the draft legislation is open until 6 March via https://consult.industry.gov.au/.
Telstra and Rio Tinto lead by example
Earlier this month, Telstra and Rio Tinto moved to 20-day payment terms for SMEs after it was reported that the giants were pushing suppliers to shave their invoices in exchange for prompt payments.
The small business ombudsman was quick to commend the companies, adding that given their policy reversal, “there is no reason why other big businesses can’t do the same”.
Putting added pressure on big business, the ASBFEO said that she may have no other choice but to recommend federal legislation requiring all businesses to be paid in 30 days in order to fix payment times.
“Australia’s big businesses have had more than enough chances to do the right thing, so if they can’t follow Telstra and Rio’s lead, I will have no choice but to recommend legislation requiring 30-day payment terms across the board,” the ombudsman said.
Maja Garaca Djurdjevic is the editor of My Business.
Maja has an extensive career as a journalist across finance, business and market intelligence. Prior to joining Momentum Media, Maja spent several years unravelling social, political and economic intricacies in Eastern Europe.
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