In a bid to expedite payments to small businesses, the Federal Government is looking at publicly reporting the worst and best payers and incorporating payment times in environmental, social and governance (ESG) obligations.
An independent review of the Payment Times Reporting Act 2020 by former Labor Party politician, Craig Emerson looks at improving the payment terms, times and practices of large businesses to their small business suppliers.
Timely payments are crucial to small businesses to help cashflow and alleviate administration burdens and financing costs.
Since the start of the Act, there has not been “any evidence of a significant improvement”, Emerson reports.
He says in the most recent reporting cycle, one-third of invoices took more than 30 days to pay, only a small increase paid within 30 days and the proportion of invoices paid beyond 60 days has shown little improvement.
According to Federal Small Business Minister Julie Collins, without government intervention, there are limited incentives for large businesses to improve payment times.
She says small businesses often lack the market power to negotiate better outcomes.
“The review finds that the Payment Times Reporting Scheme has merit but current legislative requirements impose unnecessary regulatory burdens on reporting entities, compromise the accuracy and accessibility of the payment times data and limit the effectiveness of the regulator,” Minister Collins says.
“The resulting gains to productivity can support higher wages and profits and expand the range of economic and employment opportunities, with flow on effects across the economy.”
The review makes 14 recommendations, including 23 actions for Government, which are currently being considered across three main themes:
- Overhauling the Payment Times Reporting Scheme, by clarifying objectives, simplifying who needs to report and what needs to be reported, improving the accessibility of information and addressing constraints on the effectiveness of the regulator.
- Leveraging the importance of reputation to large businesses, by publicly reporting worst and best payers and incorporating small business payment times in (ESG) obligations.
- Supporting a culture of prompt payment in Australia, through reforms that go beyond the Act and extend to unfair contract terms, unfair business practices, e-invoicing and government procurement.
For general employee advice and guidance, contact CCIWA’s Employee Relations Advice Centre on (08) 9365 7660 or email [email protected].
