The Australian Small Business and Family Enterprise Ombudsman has welcomed the Federal Government’s move to introduce faster payment terms for small-business suppliers.
The Government today announced the plan in its response to the Ombudsman’s April 2017 Inquiry into Payment Terms and Practices. The report found that late payments have been a perennial problem for businesses in Australia.
Ombudsman Kate Carnell said the Government’s response showed leadership and a willingness to lead by example.
“This is a game changer for small businesses and family enterprises that provide goods and services to the Government,” Carnell said. “Cashflow is king for small business and this will make a huge difference. It will save money on interest payments, boost confidence and free up capital for reinvestment.”
Carnell said overseas experience showed significant benefits from faster payment times.
Her inquiry report cited the European Union, which estimates that each day of reduction in late payment times saves European companies approximately 158 million euros in financing costs.
In the United States, a study showed that faster payments to businesses had created 75,000 jobs and $6 billion in wages growth.
Carnell said she hoped the Federal Government’s initiative would inspire similar responses from states and big business.
The Ombudsman’s enthusiasm for the move on payment times has been echoed by other key voices in the SME sector.
Tim Reed, CEO of MYOB, said, “MYOB congratulates the Federal Government on their decision to pay invoices in 20 days to help small businesses improve their cashflow. MYOB has long called for a national prompt payment protocol to pay small businesses on time. MYOB research has found that the majority of Australian small business are hurting both personally and financially due to late customer payments.
“It’s great to see the Federal Government taking the first step to ensure all businesses are paid on time. MYOB continues to call on the Government and businesses to implement a national prompt payment protocol as a matter of urgency.”
And Trent Innes, MD of Xero Australia, said, “Small businesses are the engine of the Australian economy, and it’s encouraging to see the Turnbull government acknowledge that. By pledging to pay small business contractors faster, the federal government is setting a positive example which will result in Australia’s small businesses being healthier and more competitive.
“We’re already seeing positive inroads in helping small businesses stay in the black. Since the launch of the voluntary supplier code in March and similar pledges from larger companies, Xero Small Business Insights shows the average payment time for small business invoices with 30-day payment terms has reduced by a full working day since March this year, and we’re seeing ongoing improvements. This move from the government will only improve situations for small businesses.
“Getting paid faster gives businesses fuel to expand. That could mean taking on more workers; headcount at small businesses grew by 1.1 per cent month-on-month in August, despite a decline in employment across all businesses. By getting paid faster, businesses can hire more quickly, and invest in the growth of their business, leading to faster growth in the economy.
“Paying small businesses faster works,” Innes concluded.