The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has commended last night’s announcement by the Prime Minister last night that large businesses will have to pay small businesses within 20 days as a condition of future government contracts, describing the move as a major win for the SME sector.
“Backed up by the requirement by large businesses with $100 million turnover to publish payment times in their annual reports, it is definitely a game-changer,” Ms Carnell said.
“This is already a requirement in the UK and it is important that Australia learns from the UK experience to ensure compliance and transparency.
“We are mid-way into a review on payment times and thousands of SMEs are telling us through our online survey that late and extended payments are affecting their cashflow and ability to sustain their businesses.”
Ms Carnell reiterated the fact that SMEs make up 99 per cent of businesses in Australia and employ over of our workers, and that just one late payment makes a difference to a small business’s bottom line. Ms Carnell said that her office is are finding some small businesses have up to 20 companies extending their payment times or just paying late, which she described as unacceptable.
The Ombudsman also welcomed the government’s commitment to pay invoices under $1 million within 20 days and to help SMEs compete for 35 per cent of all government contracts up to $20 million.
“This will deliver a significant increase in the amount of government work going to SMEs, which will increase capacity and innovation in the sector.
“All initiatives announced last night reflect the recommendations in our 2017 Payment Times and Practices Inquiry, which identified late and extended payments as one of the most significant handbrakes on small business productivity and a burden on the economy,” Ms Carnell said.
“We echo the call on all state governments to adopt these practices; invest in our SMEs so they can grow, innovate and boost employment.”
Tim Reed, CEO of MYOB, has also welcomed the Prime Minister’s call for improved payment terms for small business.
“For the Prime Minister to aim his Government toward paying small businesses within 20 business days is a fantastic commitment in itself, but to work through the Council of Australian Governments and make sure all state Governments follow this aspiration is better than I’ve seen anywhere else in the world,” Reed said.
“Decisions like this, and a directive for businesses to increase their payment term transparency to small businesses and reduce payment time to less than 20 days, is what will lead to the next wave of substantive change.
“The Prime Minister has clearly highlighted the importance of small business to the Australian community.”