Disclosure requirement welcomed but maximum payment term still sought
Businesses with a total annual income of more than $100 million would be required to report on how and when they pay their small business suppliers, following legislation introduced to Parliament yesterday.
The Payment Times Reporting Bill 2020 will also ask large businesses to detail their use of supply chain financing practices to highlight when used to extend payment times.
The legislation is estimated to cover around 3,000 businesses, including foreign companies that operate in Australia, as well as certain government enterprises.
Minister for Employment, Skills, Small and Family Business Michaelia Cash believes the bill strikes the right balance of providing transparency for small businesses without creating a “counterproductive regulatory burden” for large business.
“With the impact of Covid-19, it is even more important that large businesses, as stewards of their supply chains, pay their small business suppliers the money they are owed promptly,” Cash says.
“Through this Bill, the Morrison Government is backing Australia’s 3.5 million small businesses – they are the lifeblood of our communities and the backbone of the Australian economy.”
The view from small business and trucking bodies is that the reporting requirement is a welcome addition but the ‘right balance’ should include a maximum payment terms
Australian Trucking Association (ATA) welcomes the move to make payment times more transparent but adds the legislation does not go far enough.
“Trucking is a small and family business industry. More than 98 per cent of trucking operators are owner‑operators or small businesses,” ATA CEO Ben Maguire says.
“Trucking is also characterised by tight margins, and most costs, like wages and fuel, are incurred before operators can bill their customers.”
Maguire warns operators often have little capacity to negotiate with large customers.
“Trucking businesses are vulnerable to adverse changes in their payment times, and monitoring schemes have limited effect,” he adds.
“They are regularly ignored.
“For example, the ACCC monitoring of landside port charges is openly mocked by the stevedores, with prices climbing to astronomical levels.”
The ATA reinforces its submission on the Payment Times Reporting Framework where it calls for a mandatory code for the trucking industry to address payment terms issues facing trucking businesses.
“Given the scope of the problem, the Government needs to follow the UK’s approach and include all business to business transactions in mandatory payment terms legislation, with the statutory time period set at 20 days,” Maguire says.
“Australia’s economic recovery from the pandemic will depend on the nation’s small businesses – but cash flow to them will be more important now than ever before.”
Similarly, albeit slightly more conciliatory, Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell puts forward a maximum payment timeframe of 30 days.
While overall welcoming the framework, she its success will also depend on the information reported being easy to access and integrate.
How ATA raised its payment term concerns to the ASBFEO, here
Her office will have the power to investigate reports of big businesses failing to live up to the information provided on this register once it is implemented.
“We support the Payment Times Reporting Framework as one piece of the puzzle, but it won’t solve the problem of late payment times on its own,” Carnell says.
“Legislation requiring SMEs to be paid in 30 days is the only way to drive meaningful cultural change in business payment performance across the economy.
“Ultimately, cash flow is king for small business and we know that if small businesses are paid on time, the whole economy benefits.”
“Much of the Australian small business community has been devastated by the COVID-19 health and economic crisis and prompt payment times are critical to their survival.”