Payment times data: Little improvement from poor performers

The Australian Payment Times Reporting Regulator’s January 2024 update identifies concentration of industries working with and making payments to small businesses, reporting that just five industries make up more than half of the reporting entities that make payments to small businesses: financial and insurance services, manufacturing, wholesale trade, construction, and retail trade, with a total of 54%.

The industry with the most businesses transacting with small businesses – financial and insurance services – also tops the list of industries with the greatest proportion of invoices paid within 30 days.

The other four – manufacturing, wholesale trade, construction and retail trade – are joined by agriculture, forestry and fishing as well as the catch-all ‘other services’ at the bottom of the list. Four out of the five industries transacting with small businesses the most are making those small businesses wait more than 30 days for payments.

The report did contain some good news for small businesses that have worked to shorten the payment terms their clients commit to – a reduction in standard payment terms to an average of 35.4 days. This means that in the 2.5 years since the regulator first tracked and reported this figure, less than two days has been shaved off the average standard payment terms.

The time it actually takes for small businesses’ invoices to be paid has also changed little. A total of 67.2% of invoices were paid within 30 days in the reporting period Jan–Jun 2023, a 2.7% increase since the regulator’s first reporting period in 2021.

While the government has pledged to implement the recommendations of the Payment Times Reporting Scheme (PTRS) review, we asked Public Accountant readers what actions they are taking to shorten payment times now, and the impact delayed payments are having on cash flow.

Haven’t yet responded to the payment times poll? It takes just three minutes – share your experiences.

Readers shared the actions they are taking to shorten payment times, including:

• Automating reminders
• Invoicing earlier
• No longer working with late payers
• Direct debits, and one reader added: “The 1% of customers not  on direct debit are the greatest challenge.” 

Still, all respondents told us they were receiving payments more slowly or in around the same timeframe as they were 12 months ago.

The impacts of slow payments are great. One comment from a reader indicated that they receive payments late because their clients are also being paid slowly – one poor performing payer’s disruption can be felt throughout the ecosystem. Others told us they are having to delay payments, reduce investment in innovation and turn away from expansion opportunities.

Finally, respondents shared that they do not use the Payment Times Reporting Register and would be unlikely to report late payers to an independent body.

Low uptake of the Payment Times Reporting Register, a dashboard presenting the large dataset collected by the regulator, is predictable – the dashboard is not easy to use, and is data-rich but insight-poor.

The PTRS review recommended that this register be simplified greatly. This could allow small business leaders to benchmark standard terms, and to derive useful information about payers and trends, such as industries, locations or other factors that might present greater risk.

The prediction from respondents that they would not be comfortable reporting late payers to an independent body that advocated for small and medium businesses based on repeated complaints of late payments or unfair payment terms remains to be proven.

An advocacy body to escalate systemic complaints to the Australian Competition and Consumer Commission was among the review’s recommendations, so the government has committed to creating it. Watch this space.

Read next: Payment times reporting: How the latest review will impact small business payments