Treasury to conduct payment times review as small business invoice times stretch to 33 days

The Treasury has committed to a review of the federal Payment Times Reporting Scheme, earning plaudits from small business representatives concerned that SMEs are still waiting too long to be compensated for work conducted for major companies.

On Tuesday, the federal government confirmed a review of the two-year-old system, which is designed to encourage big businesses to speed up their payments towards the smaller operators that rely on those contracts to maintain cashflow.

The Payment Times Reporting Scheme takes payment data from firms with an annual income of more than $100 million and presents the findings in a public dashboard, setting payment time expectations for small businesses.

By making the payment times public, big businesses are also incentivised to speed up their payments, encouraging more small businesses to offer their services.

At time of writing, the average payment time is 33 days — above the Labor government’s target of 30 days.

The review will judge the scheme’s effectiveness in helping SMEs make informed decisions about the customers they work with, and whether big businesses have been dropping their payment times as a result.

It will also consider if eInvoicing has driven down payment times and if mandatory payment times are required to speed up the invoice process.

Speaking to reporters in Sydney on Tuesday, Minister for Small Business Julie Collins said the review would examine the balance of power between SMEs and their big-name customers.

“What we do want to do is to make sure that small businesses are not carrying an unfair burden when it comes to payment times,” she said.

“We would expect that big entities in Australia are able to pay small businesses within 30 days. That is our expectation, and they should be able to do that.”

Australian Small Business and Family Enterprise Ombudsman Bruce Billson welcomed the review, saying its analysis showed 23% of small businesses are paid 120 days after completing their work.

“A vast number of big businesses just aren’t meeting the mark and it’s causing needless harm and cashflow challenges for small and family businesses who are waiting too long to have their invoices paid,” he said.

“Small businesses need the certainty of being paid promptly in order to plan, grow, and create jobs for more Australians,” said Australian Chamber of Commerce and Industry chief executive Andrew McKellar.

“This review will support the important objective of ensuring small suppliers get paid on time, every time.”

The review will be helmed by economist Craig Emerson, who also served as minister for small business under the Rudd government.

A public consultation period will accompany the review, with a report expected by June 30, 2023.