Hope for Australian SMEs to get paid on time in the future
Every year, $115 billion worth of payments to small businesses are late.
The average time spent by SMEs chasing up payments from big business is 8 hours per week and is significantly hindering growth within the Australian SME sector.
The outgoing Australian Small Business and Family Enterprise Ombudsman Kate Carnell thinks all businesses, no matter what their size should be paid in 30 days.
Some large organisations have been known to pay invoices 60 and sometimes even up to 90 days after they’ve been submitted.
This doesn’t just happen in Australia either.
A study in the UK found that large businesses pay small suppliers on average 30 days later than bigger firms.
Why is it important for small businesses to get paid on time?
Getting paid on time helps small enterprises:
- Pay for daily running costs of the business
- Grow as a business
- Employee more staff
- Help the local economy thrive
It is great to see industry leadership from some of Australia’s largest companies like Telstra and Rio Tinto, which have both moved to 20-day payment terms. This leadership should be commended and will go a long way in paving the path for other organisations to take on similar leadership roles across other industries to improve payment terms to SMEs.
The Victorian Government set up the Australian Supplier Payment Code which was created to help small businesses get paid on time.
Businesses such as Telstra, Rio Tinto, BHP, Coles, Coca-Cola, Qantas and Energy Australia have all signed up to the code.
However, this is a voluntary initiative, so businesses aren’t obligated to join.
Payment Times Reporting Scheme
On January 1, 2021 the Australian Government started the Payment Times Reporting Scheme, which means any enterprise that has an annual income of over $100 million must report publicly on how and when they pay their smaller suppliers.
This transparency will help small businesses see which larger companies are better to do business with and provides the general public with more information about the large organisations they do business with.
Hopefully, this scheme will lead to small businesses being paid fairly and on time.