The federal government has urged small businesses to share their thoughts on how to accelerate payment times between major companies and their suppliers, days after a report revealed lacklustre progress on payment times since 2021.
Consultations for an independent review of the Payment Times Reporting Act 2020 are now open, allowing entrepreneurs to say if more could be done to improve big business compliance and boost small business cashflow.
Under the act, businesses with an annual income of more than $100 million must submit information regarding their contracts with SMEs.
That information is displayed on a public dashboard, effectively ‘naming and shaming’ big businesses which pay their suppliers months after signing a contract.
But a report on the scheme, issued last week, revealed the median contract time was unchanged at 30 days at the end of June 2022, the same median duration as when the scheme launched in January 2021.
Average payment times marginally decreased from 36.29 calendar days to 35.66 over the scheme’s duration, which Treasury officials labelled a “concerning” outcome for the scheme.
Now, as part of an independent statutory review, small businesses have been invited to submit their views on what measures could improve payment performance.
The review, helmed by former minister for small business Craig Emerson, addresses a “policy dilemma”, in which “large businesses have little inherent incentive to improve payment terms and performance, and small businesses usually lack the market power to negotiate better payment times and terms with large businesses”.
A consultation paper asks if mandating maximum contracts would do what a dashboard can’t, and how those rules should be designed and implemented.
It also asks if further disincentives would spur big businesses to expedite their payments, and whether sharpening rules around interest on late payments, as exists in overseas jurisdictions, would help the issue.
Small Business Minister Julie Collins, who launched the review, said the consultation comes in the shadow of a “disappointing” report, which “tells us payment performance and payment terms are not improving”.
“I would encourage small business owners across Australia to contribute to the review so it reflects their current challenges and issues with payment times,” Collins said in a statement provided to SmartCompany.
It is “critical” that small businesses are paid on time, she added, echoing research that suggests 30-day payment terms between big and small businesses would benefit SMEs to the tune of $522 million each year.
Small business owners interested in sharing their thoughts have until March 1.
The review will provide its report to the Minister for Small Business before June 30 this year.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
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