Will the Payment Times Reporting Amendment end late payers?

The Payment Times Reporting Amendment Bill 2024 has just made its way through the Senate after clearing the House of Representatives. The Bill brings a major overhaul to the Payment Times Reporting Act 2020. It aims to cut out inefficiencies, streamline processes, and encourage big businesses to pay their smaller suppliers on time.

So, what’s changing?

Big business to be held accountable

First up, the reforms introduce consolidated reporting under Australian accounting standards. This means that the data reported will now be more accurate, complete, and comparable. Better data leads to better decision-making!

But that’s not all. Once the bill is in action, the regulator will have the power to name and shame the best and worst-paying large businesses. They’ll also dig into research on how slow payments affect the entire economy.

The minister for small business will now have the authority to direct companies that are in the slowest 20 per cent of payers to make enhanced disclosures. This means more transparency on who’s holding up payments and why.

Slow payers to be named and shamed

In an interesting twist, if a business is identified as a slow payer, the minister can order them to publicly acknowledge it on their website and other important documents such as supplier contracts. They will also have to explain how to access their payment times reports.

The Payment Times Reporting Regulator will also officially list them as a ‘slow small business payer’. The hope is that this should encourage businesses to clean up their act and pay on time.

Senate speaks up for small biz

Speaking on the Senate floor, Senator Paul Scarr highlighted the importance of the reforms. “Imagine you are a small business waiting two, three, or four months to be paid by a large corporation. It is really unacceptable,” Scarr said.

He referenced the Australian Small Business and Family Enterprise Ombudsman’s findings, which indicated that late payments severely impact small businesses’ cash flow, often leading to insolvency.

Scarr added that while the Coalition supports the proposed reforms, they advocate for recognising businesses that pay promptly.

“Not only should slow payers be outed, but we should also acknowledge those who are fast small-business payers. It shouldn’t just be a stick; there should also be a carrot,” he stated.

To this end, Scarr suggested the amendments include the Regulator maintaining a list of fast-paying businesses (those who paid within 20 days or less).

Amendments follow review

The amendments follow recommendations from a review by Dr. Craig Emerson, which looked into the effectiveness of the original Payment Times Reporting Act. Dr. Emerson’s review made several recommendations, many of which have been incorporated into this new amendment bill.

Speaking with Accountants Daily, Minister for Small Business Julie Collins remarked that these reforms would be “a shot in the arm for small businesses,” resulting in faster payment times and improved cash flow, reducing financing costs, and boosting productivity.

She also emphasised the unfairness of large corporations delaying payments to their small suppliers. “Our Government knows how important cash flow and payment times are to small businesses. For small businesses who supply goods and services to large companies, it’s simply unfair for those big corporations to delay paying the invoice.”

Advocates respond

Luke Fossett General Manager of GoCardless welcomed the passing of the Payment Times Reforms through the Senate saying it was good news for businesses of all sizes.

“Those that pay their suppliers on time and support Australia’s SMBs will now be getting some positive recognition By highlighting those who prioritise quick payments to small businesses, we give SMBs confidence in their partnerships while also informing consumers about which businesses treat their suppliers well< Fossett said.

GoCardless Pursuing Payments report revealed that one in five Australian small business owners and decision-makers estimate losing between $6,000 and $30,000 from late payments annually.

Fossett said he is hopeful that these reforms will create change as so many small businesses are impacted by late payments.

“Late payments affect every business, but they also have a disproportionate impact on women, creating an uneven playing field. According to our data, 29 per cent of women say they feel uncomfortable asking customers for payment – this rises to almost half (46 per cent) when it comes to chasing late payments. However, only 26 per cent and 40 per cent of men share these sentiments, respectively,” Fossett said.

“The bottom line is: helping businesses to get paid faster,  will create net benefits for the businesses themselves, but also their employees and the economy broadly – and the passing of this legislation is a massive step in the right direction,” he concluded.

With these changes, the future looks brighter for small businesses in Australia. Improved payment times mean healthier cash flow, reduced administrative burdens, and fewer financing costs. It will ensure that small businesses will no longer have to bear the brunt of delayed payments from big corporations.

For more detailed information on the Senate discussion, check out the full transcript on the Hansard website.

The Payment Times Reports Register is available at paymenttimes.gov.au

This post first appeared on Kochie’s Business Builders.

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