Interest rates kick in as government still fails to pay business on time: data

The government has become worse at paying small business contracts on time, with data released yesterday showing 96.1% of invoices were paid within 30 days during the 2012-13 year – down from 96.8% during 2011-12.

The government department which is slowest at paying up is the Department of Health and Ageing, which only paid 89.58% of its invoices to business on time.

The best government department at paying on time is the Department of Industry, Innovation, Science, Research and Tertiary Education which paid 99.61% of invoices on time. 

Those small businesses waiting on payment at least got the benefit of interest payments on requests from the business for payments made after 30 days and via a self-generated government payment where payment was made after 60 days of an invoice.

The data shows in 2012-13, a total of 465 late payment interest invoices were paid, up from only 50 interest invoices paid the year before. 

The total amount of interest paid on late invoices in 2012-13 was $35,110.23.

But even better interest payments are set to kick in as part of the government’s election promise, which committed federal government agencies to paying interest on outstanding bills if they didn’t pay small business suppliers on time. 

The new policy will start from July 1, 2014 and as part of this commitment department and agency budgets will not be topped up to cover any delinquency costs as an added incentive for them to pay small business on time.

Small Business Minister Bruce Billson told SmartCompany no small business should be left waiting for payment and the new policy should encourage government departments to cough up on time.

“It’s designed to make sure the government’s cash flow isn’t improved at the expense of small business,” he says.

Billson says the government should be setting the example to pay on time.

“We saw a decline in the timeliness of payment recently and we need to turn that around,” he says.

The government’s payment record actually looks pretty good in comparison to the private sector with Dun & Bradstreet’s latest Trade Payments Analysis survey finding in the last quarter of 2013, only 46% of invoices were paid within a standard 30 day period.

The average time to pay invoices was 53 days.

Billson says the government can only try to set an example for the private sector.

“We are hopeful that bigger businesses will see it is good leadership from the Commonwealth and follow suit,” he says.