Construction, manufacturing small businesses still hampered by payment time lags

The regulator’s report showed that 57 per cent of small businesses were paid within 30 days down from 58 per cent in the prior period and 8 per cent were paid over 60 days.

Within the construction industry, the land development and subdivisions sub-sector was an area with noted deterioration. At the same time, entities within the house construction subsector reported an average improvement in payment practices.

Manufacturing small businesses also saw a slight deterioration recording 55 per cent of small businesses being paid within 30 days (56 per cent in the preceding period) and 14 per cent in over 60 days. This increase in the percentage of payments made in over 60 days was the highest among all industries.

The most recent payment practices reported for the half year to June 2022 highlighted a slight deterioration compared to the previous half year across all large companies in Australia.

The percentage of payments made within 30 days remained relatively stable at just below 70 per cent. In contrast, the portion of payments made in over 60 days deteriorated slightly, from 7 per cent last period to 7.4 per cent for the half year to 30 June 2022.

The agriculture, forestry, and fishing industry showed improvements. On average, the industry reported a higher percentage of payments within 30 days and a reduction in payments made outside of 60 days. There was also a similar improvement in the small sample of reporting entities from the arts and recreation services industry.

While the construction and manufacturing industries continue to have the slowest payment times, analysis by BDO showed that large Australian businesses have improved their payment practices for small businesses since the scheme’s introduction. This has occurred despite the significant challenges that Australian businesses have faced including natural disasters, such as the NSW floods, workplace absenteeism due to COVID-19, supply chain challenges due to COVID-19, inflation, increasing interest rates, and increasing energy costs.

This is the third Payment Times Reporting Regulator dataset from large businesses covering their payment practices for their small-business suppliers.

There are now more than 25,353 reports submitted on the register from 9,487 reporting entities. The most recent dataset covers the six months to June 2022.

The report from November 2022, highlighted that there had been improvements in the overall payment times of large businesses in Australia during the six months to December 2021.

In January 2023, the regulator provided an update on the scheme and stated their intention to pursue compliance and enforcement activities with a focus on identifying instances of failure in submitting reports and improving the quality of reporting.

The deadline for the lodgement of the next period of reports (for the half year to 31 December 2022) is 31 March 2023. Reporting entities failing to report can incur a maximum daily penalty of $66,600. For example, if a reporting entity is nine days late in submitting a payment times report, they could be penalised up to $600,000.