Small businesses can soon charge the Federal Government interest on new contracts if it fails to pay on time
Small businesses will have the right to charge the Federal Government interest on new contracts if it fails to pay on time, Prime Minister Kevin Rudd says.
Rudd announced the initiative while speaking at the Small Business Summit in Brisbane last week.
From December 1, new small businesses contracts signed with government departments up to $1 million will have to be finalised within 30 days otherwise small business will have the right to charge penalty interest.
Rudd says that is almost 70,000 contracts a year.
“If we don’t (pay) the proposal…you as small business can charge us interest until we do. I intend to lead by example,” Rudd says.
Big business was also told to lead by example, with Rudd telling them to lift their game on paying small businesses on time.
According to latest Dunn and Bradstreet trade payment figures released last week, businesses with more than 500 employees continue to be the worst payers, averaging 59 days–double the standard term—to settle accounts.
“It makes a big difference to small businesses with cash challenges,” Rudd says.
Rudd also committed to simplifying the tendering process for government contracts to increase competition.
Government departments and agencies will be required to review their operations and simply the procurement process.
Rudd says this will make it cheaper and easier for small businesses to compete for tenders.