Business, tax professionals cautious over new Payment Times Reporting Register

The register, launched on Tuesday (30 November) by the federal government aims to allow small businesses to monitor how their cash flow stands by publishing the time it takes for large businesses and certain government entities to pay their small-business suppliers.

“Long payment terms (over 30 days) and late payments has always been a sore point for Australia’s army of small businesses,” Tony Greco said.

“This has negative impacts on these businesses, and across the economy. Small businesses that are paid slowly, pay their suppliers more slowly in turn. The Payment Times Reporting Scheme aims to improve payment outcomes for small businesses by increasing transparency on how and when large businesses pay their small business suppliers.”

However, Mr Greco said the scheme doesn’t set any payment terms or mandate payment times for large businesses.

“It is hoped that this increased level of transparency will lead to better payment outcomes. If the increased transparency does little to address this important issue, then another option is for Government to mandate payment terms similar to what Government agencies are required to do when dealing with small business,” Mr Greco said.

Lielette Calleja, chief accounting technician with the Association of Accounting Technicians Australia said the register is “great for businesses with reporting income of $100 million and over”.

“It doesn’t really help the average small business battler who might be turning over $1-$10 million and who potentially has used their personal funds to fund the business, therefore, bigger personal risks at stake,” Ms Calleja said.

The Australian Small Business and Family Enterprise Ombudsman Bruce Billson said the new register requires big businesses to be upfront and honest about the time it takes to pay their small-business suppliers.

“We welcome the Payment Times Reports Register, which reveals the payment policies of more than 6,000 businesses,” Mr Billson said.

“It’s an important first step in addressing late payments, which continues to be a huge issue for small businesses.

“While it’s still early days, the register reveals that more than 30 per cent of invoices are being paid late by big business for what has already been earned by small business. That’s incredibly disappointing.

“My office will be keeping an eye on future reports to gauge trends and do what we can to ensure big businesses are living up to the information provided on the register.

“In the meantime, I encourage small businesses to engage with the register and make informed choices about who they do business with.

“Given much of the Australian small business community has been rocked by the COVID-19 pandemic, prompt payment times are critical.

“Big business has a role to play in the nation’s recovery and that starts with paying their small business suppliers on time. Adopting e-invoicing is a great way to ensure suppliers are paid promptly. Good business pays.

“Ultimately, cash flow is king for small and family businesses and if they are paid on time, the whole economy benefits.”

More than 75 per cent of reporting entities make payments to small businesses. Industries with the highest procurement from small businesses include agriculture, forestry and fishing, construction, and administrative and support services, all with over 40 per cent procurement from small businesses.

Industries including mining, retail trade, public administration and safety, and wholesale trade have the lowest procurement from small businesses, all with less than 25 per cent.

Across all reporting entities, average payment term for small business is 37.27 days (i.e. the average term offered in contracts to small businesses). Manufacturing offers the longest average standard payment terms at 48.62 days and public administration and safety has the lowest at 24.06 days.

Across all industries 44 per cent of small-business invoices are paid within 20 days, with less than 3 per cent being paid after 90 days or more.