The Payment Times Reporting Bill aims to address late payments and the consequential struggle with cash flow, which is an ongoing problem for Australia’s 3.4 million small businesses, with the negative impacts spreading widely across the broader economy with juggling suppliers.
Paying small businesses late creates a back log effect. The Government has been prompted by Xero’s report last year – which revealed late payments from big businesses costs small $7billion a year – to implement the new Payment Times Reporting Bill.
Under pressure from the small business community and the Ombudsman Kate Carnell, the Government has now introduced the legislation into Parliament. The Payment Times Reporting Framework will require 2,500 of Australia’s largest businesses and government enterprises to report how long it takes them to pay small business.
Specifically it applies to large businesses with over $100 million in annual turnover, including foreign companies and government corporate entities, and they must publish information on their small business payment times and practices.
“Much of the Australian small business community has been devastated by the COVID-19 health and economic crisis and prompt payment times are critical to their survival,” Kate Carnell, The Small Business Ombudsman, said.
“This reporting framework will require big businesses to be up front and honest about the time it takes to pay their small business suppliers. It will be important that the information reported is easy to access and integrate.
“This gives small businesses some choice around who they do business with.
“Importantly, the legislation introduced today will apply to around 3,000 Australian large businesses, including foreign companies that carry an enterprise in Australia along with certain government enterprises.
“It also defines the small business as those that have a turnover of less than $10 million, which covers 99% of businesses.
“My office will be invoking the powers we have to investigate any reports of big businesses failing to live up to the information provided on this register once it is implemented.
“We support the Payment Times Reporting Framework as one piece of the puzzle, but it won’t solve the problem of late payment times on its own.
“Legislation requiring SMEs to be paid in 30 days is the only way to drive meaningful cultural change in business payment performance across the economy.
“Ultimately, cash flow is king for small business and we know that if small businesses are paid on time, the whole economy benefits.”
Kate Carnell’s welcoming of the legislation was echoed by Xero’s Managing Director (Australia), Trent Innes, who has seen first-hand the devastating impact that late payments can have on small business – which have been brought to the forefront of conversation with Xero’s insights reporting.
“It is pleasing to see the government taking further steps to address the issue of late payments and we welcome the introduction of the Payment Times Reporting Framework legislation to Parliament,” Innes said.
“Xero’s 2019 report on late payments estimates that half of all invoices issued by small business to big business are paid late. Big businesses pay $115 billion late to small businesses each year with payments arriving 23 days past their due date on average. Changing this behaviour will have enormous benefits for small businesses and the broader economy.
“As Australia’s economy begins to recover from the fallout of the COVID-19, it will be more important than ever that businesses are being paid on time to boost their confidence to invest and employ.
“Additionally, following the commitment of government to move towards e-invoicing and five day payment terms for invoices under $1 million from January 2020, there should be no reason why big business can’t follow suit.
“In providing greater visibility, the Payment Times Reporting Framework will ultimately inform whether industry-led solutions are working or if further legislation will be required.”
