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The government has confirmed it will be “increasing pressure” on big businesses to pay invoices on time, a move that has been welcomed by brokers.
Big businesses that fail to pay smaller organisations on time will be named and shamed as part of the Albanese government’s response to the independent review of the Payment Times Reporting Act 2020.
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The review, conducted by Craig Emerson, put forward several recommendations to the government on how it could improve payment times for small businesses, noting there was a “clear case for government intervention to hold large businesses to account and improve the payment times to small businesses”.
In response, the government has said it agrees (or agrees in principle with all recommendations supplied) and has also pledged to commit $8.1 million to support several initiatives that will deliver better outcomes for SMEs.
The government added that it has committed to action including:
- Increasing pressure on big businesses to improve payment times by highlighting the best and worst payment performers.
- Overhauling the Payment Times Reporting Act 2020 to update the objects of the Act, simplify and streamline reporting, add proportionate regulatory powers, and address inefficiencies with current reporting requirements and processes.
- Ensuring payment times are considered in development of relevant government reforms and policies, including unfair trading practices reforms, e-invoicing, and government procurement.
- Reducing the regulatory burden for entities reporting under the Payment Times Reporting Scheme.
The Minister for Small Business Julie Collins MP suggested that the initiatives put forward would see small businesses have a greater chance at a level playing field.
Ms Collins stated: “This is a matter of fairness – big businesses should not take advantage of Australia’s 2.5 million small businesses by failing to pay them on time.
“I will work closely with the Treasurer and other ministers who have important responsibilities for the successful delivery of the Albanese government’s response.”
The chief executive of the Council of Small Business Organisations Australia (COSBOA), Luke Achterstraat, commented: “Every time a small business is not paid on time there is a blow to productivity, efficiency, and time spent by the owner to chase payment. This hurts the small businesses itself, but also has a flow-on effect to their contractors, suppliers, and undermines business investment and growth.
“There is also increasing evidence that late payments impact the mental health of small-business owners.
“We welcome efforts that ensure payment times are considered in the development of relevant government policies, including unfair trading practices reforms, e-invoicing, and procurement.”
Broking industry reacts
Speaking to The Adviser following the government response, several brokers have welcomed the move.
Director at TM Finance Group, Belinda Gibson, commented when she was previously working as a relationship manager at Westpac, big retailers and supermarkets were notorious for paying their small-business suppliers slowly, “particularly around Christmas time”.
She added that they would “hold it over anytime around reporting financials, so their cash holdings were higher on their balance sheets”.
Similarly, the director at Mortar Finance, Zac Goodman, stated that he was “very supportive” of the government’s plans to report or highlight the best and worst payment performers particularly as cash flow lending requests have been ticking up in recent months.
However, the broker said that while the government looks to crack down on big businesses it also needs to ensure there is a solid large business infrastructure so they remain solvent. He outlined that it would hurt mum-and-dad businesses more if large organisations went under as a result of overstretched cash flow – as has been the case in the construction industry – rather than paying late.
[Related: Supply chain finance misuse flagged to government]
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