According to the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), 53% of invoices are paid late, and on average, 23 days overdue. That’s $115 billion paid late each year, an impact of $52,000 for every small business in Australia.
This matter has managed to grab the attention of the Australian parliament who are now working to regulate the process.
A healthy cash flow is vital to a small business's survival and is the number one reason why they can fail. Payment terms have a significant impact on cash flow.
October 2020 saw parliament pass a bill to focus on the issue and help small businesses get paid on time by introducing the Payment Times Reporting Scheme (PTRS).
Under the scheme, large businesses and large government enterprises will need to report their small business payment terms and times.
The scheme will:
- Increase the transparency around reporting entities payment performance
- Promote good payment behaviours by disincentivising large businesses to pay late due to public disclosure
- Help small businesses make better-informed decisions about who to do business with
- Enable small business suppliers to get paid quicker.
The scheme applies to:
- large businesses and certain government enterprises with a total annual income of over $100 million
- controlling corporations where the combined total annual income for all members is more than $100 million
- businesses with a total annual income greater than $10 million and that are part of a group headed by a controlling corporation with a collective income greater than $100 million
Businesses that are not covered by the scheme will be able to apply to volunteer report in April 2021.
Large Businesses will be required to publish bi-annual reports on their small business payment times and practices and daily penalties apply for failure to report, although there will be a 12-month penalty free transition period from implementation to enable reporting entities time to familiarise themselves with the scheme.
The reports will be placed on the publicly available Payment times reporting register.
Failure for large entities to report could result in daily penalties of 60 penalty points ($13,320) for an individual and 300 penalty units for a body corporate ($66,600) per a day.
Small businesses do not have to do anything for the PTRS to operate, and those that do not wish to be included in the scheme can opt-out by accessing the PTRS using their MyGovID.
The PTRS aims to further encourage the adoption of supply chain management initiatives, as an increased level of accountability for payment terms disclosure will change the way we prioritise payment terms.
By creating transparency around the payment terms and practices of large businesses, the scheme aims to improve the payment outcomes for Australia’s 3.5 million small businesses.
More information about the PTRS can be found here.
The team at Morris Finance can assist you with all types of business finance, and our dedicated finance specialists can facilitate financial solutions that allow you to grow your business. Whether you are looking to finance a business vehicle, commercial equipment, heavy machinery or improve your cash flow, give us a call today on (03) 5223 3453 to see how we can help you.
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