“Huge move”: Victorian government commits to paying SME suppliers within 10 days

Small businesses supplying goods and services to the Victorian government can expect eased cashflow, following the state government’s commitment to continue paying SME supplier invoices within 10 days.

On Friday, the Andrews government announced new payment terms will apply to contracts under $3 million entered from January 1, 2021, in a move Australian small business and family enterprise ombudsman Kate Carnell welcomes.

“It’s a huge move that helps cashflow,” Carnell tells SmartCompany.

“And right now, for SMEs generally, and particularly in Victoria, improving their cashflow is in many cases the different between survival and businesses having to close”.

While the Victorian government reduced payment times throughout the pandemic, reforms to its Fair Payment Policy mean the timeframe of 10 days will be maintained.

Carnell says the Victorian government’s decision is a significant step in the right direction, and acknowledges other governments have made similar changes.

Last year, the federal government reduced its small business invoice payment time to 20 days, and the New South Wales government reduced payment times to SME suppliers using electronic invoices to five days.

E-invoicing

The federal and New South Wales governments have already committed to paying SME supplier electronic invoices within five days.

“The federal government has undertaken to implement e-invoicing and has required all its department to become e-invoice-enabled, which is a great step in the right direction,” Carnell says.

Based on the speed and digitally secure nature of e-invoicing, Carnell encourages all SMEs and governments to adopt electronic invoicing.

According to Carnell, platforms such as Xero and MYOB are e-invoice-enabled, so small businesses can easily use electronic invoices with these services.

“Another good bit about e-invoicing is that it overcomes a number of cyber security issues so that invoices can’t be tampered with because it is a secured system,” she says.

Increasing SME procurement

Carnell would like to see state and federal governments increase the number of government goods procured from small businesses, particularly in Victoria where businesses have endured a second lockdown.

“The importance of the Victorian government to purchase from SMEs and particularly SMEs in Victoria is very real,” Carnell says.

Carnell says the New South Wales government recently announced it has procurement from SMEs up to about 50%, whereas the federal government has procurement from SMEs at only 26%.

Tech and innovation

To really boost procurement from SMEs and help small businesses recover from the effects of the pandemic, Carnell says it is now more crucial for state governments to procure IT and technology from local SMEs.

“And not just for paper and stationary, for innovation as well,” Carnell says.

State governments are more likely to procure from multinationals rather than local businesses when securing IT services and technology.

“Governments think multinationals are less risky but there’s no evidence of that at all,” Carnell says.

“The challenge is to try and get us out of the current recession and Victorian is doing it tougher that most other states,” she says.