Consultations on the draft Payment Times Reporting Framework legislation have been initiated recently by the Federal Government in an effort to improve the processing of payments to small businesses.
In light of this development, the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, is encouraging small-business owners to have their say on the draft law which would require big businesses to be more transparent about their payment times.
Cashflow is king
“Cashflow is king for small businesses and we welcome the federal government’s continued efforts to ensure they are paid on time,” Carnell said. “This framework will require big businesses to be upfront and honest about the time it takes to pay small businesses, to help small businesses choose who they supply.”
Under the draft law, businesses with a turnover of more than $100 million will be required to publish information about their payment policies. The ASBFEO stated that the law, if passed, is seen impact about 2500 large Australian businesses, including foreign companies and government entities.
The $7 billion “hole”
Recent data from Xero reports that late payments by large businesses to small businesses account for 53 per cent of all invoices. That is equivalent to $7 billion of working capital that is being missed out by Australian small businesses every year.
The ASBFEO pointed out such money being missed out by SMEs could have been used to grow their business.
“Small businesses can now provide their feedback on this proposed reform which is designed to drive cultural change in business payment performance across the economy,” Carnell said.
Consultation on the draft legislation is open until 6 March via https://consult.industry.gov.au.