The Federal Government will conduct a review of the Payment Times Reporting Act, led by former Labor minister Craig Emerson.
It comes after almost seven in ten big businesses are failing to pay their smaller counterparts on time.
Analysis by the Australian Small Business and Family Enterprise Ombudsman reveals small businesses are being paid late. Just 31 % of big businesses paid small business customers within 30 days, while 23 % per cent took 120 days.
“This needs to be taken more seriously. Finance is the oxygen of enterprise. Cash flow is vital to these small and family businesses,” Ombudsman Bruce Billson told ABC.
The Act requires large businesses and government enterprises to submit payment times reports to the Payment Times Reporting Regulator every 6 months. This includes information on their standard payment terms, actual payment performance, and the use of supply chain financing arrangements.
The review will look at:
- Efficacy of the Act in meeting its objectives (to enable small businesses to make informed decisions about potential customers and create an incentive for reporting entities to improve their payment times).
- Impact of related government policies, for example, eInvoicing, on the payment terms and practices of reporting entities
- Effectiveness of other policy measures, including mandatory payment times, to improve payment terms and practices for small businesses.
The review, to be delivered by mid next year, is expected to also examine whether maximum payment periods could be introduced, with periods of five to 30 days to be considered.
Australian Chamber of Commerce and Industry chief executive Andrew McKellar said the review was a crucial opportunity to improve outcomes for small businesses.
“Australia’s 2.5 million small businesses are the engine room of the economy and sit at the heart of our local communities,” he said.
“Small businesses need the certainty of being paid promptly in order to plan, grow, and create jobs for more Australians.
“This review will support the important objective of ensuring small suppliers get paid on time, every time.”