IPA commends government move on payment times
The Institute of Public Accountants has welcomed the government’s decision to move forward with shorter payment times for small businesses but questioned the decision to stop short of the recommendations from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).
Earlier this year, ASBFEO released its report, Payment Times and Practices Inquiry, putting forward a recommendation for the government to adopt the 15 business day payment time by July 2018.
Prime Minister Malcolm Turnbull has announced that federal government departments and agencies will have to pay small businesses within 20 days, falling short of the ASBFEO’s 15-day recommendation.
IPA senior tax adviser Tony Greco said the move was “leading in the right direction” but failed to match up to the recommendation.
“More importantly it sets the scene for the commercial world to follow suit and the commercial world is the one that also needs to improve especially in relation to smaller suppliers,” said Mr Greco.
“It's a case of what the government does to cultivate the sort of culture in the commercial world that they also apply similar types of policies for smaller suppliers.”
The ASBFEO report found that late payments have been a perennial problem for businesses in Australia, with 26.4 days being the national average before payments were made.
The inquiry report cited the European Union, which estimates that each day of reduction in late payment times saves European companies approximately 158 million euros in financing costs.
In the United States, a study showed that faster payments to businesses had created 75,000 jobs and $6 billion in wages growth.
ASBFEO Kate Carnell welcomed the government’s decision to push forward with introducing shorter payment times.
“This is a game changer for small businesses and family enterprises that provide goods and services to the government,” Ms Carnell said.
“Cash flow is king for small business and this will make a huge difference.
“It will save money on interest payments, boost confidence and free up capital for reinvestment.”