Turnbull government showing leadership with improved invoice payment times

Australian small businesses have been suffering from a widespread culture of late payments owed to them by bigger businesses and multinationals, but there are signs that there may be a healthy shift in corporate payment behaviour. And leading the way, it seems, is the Australian Federal Government.

The Turnbull Government recently released its “Pay On-Time” report, revealing the results of its survey into how Federal Government agencies are behaving when they are customers of Australian small businesses and compliance with its payment policies.

And the report card indicates that around 96% of small businesses with Government contracts are being paid within 30 days of invoicing, and 60% of invoices worth up to $1 million are being paid within 20 days. In 2002, only 82% of invoices were being paid within 30 days, said the Minister for Small Business, Michael McCormack.

McCormack hails the survey results as a “great outcome” for the 6,800 small businesses holding Government contracts around the nation. Not only that, but the Government is being lauded for “leading the way for payment culture in Australia” which it is hoped will benefit Australian small businesses generally.

Government policy has traditionally been to require its agencies to pay invoices for contracts under $1 million within 30 days. But in recent years there has been a renewed awareness of how small businesses are frequently being taken advantage of by their customers extending payment terms. Delayed payments contribute to cash flow problems for small businesses, limiting growth and in some cases, leading to insolvency.

An inquiry into payment times and practices by Australian Small Business and Family Enterprise Ombudsman Kate Carnell released its final report last April, and recommended that the Government improve its payment times and practices by adopting a 15 day payment time by mid-2018.  In response to that report, the Government has now mandated its agencies to pay invoices within 20 days.

With the Federal Government’s revision of its payment policy, it’s hoped that other levels of government as well as industry will follow suit, thereby altering the existing payment culture which threatens small businesses the most.   After all, small businesses are a critical component of the economic ecosystem – it’s in everyone’s interests to see the sector thrive.

Ultimately, the Government’s efforts still show room for improvement, however, since a percentage of its invoices are evidently still not paid on time, representing a substantial sum of money owed to small businesses.

The data collected in the Government survey also fluctuates a good deal depending on the particular agency involved. If you look at the breakdown by agency of the percentage of invoices paid on time, for example, the Australian Federal Police are excellent with 97% of invoices paid within 20 days, compared to the Department of Finance with only 47.0% paid within 20 days. The Department of Human Services can only manage 4% within 20 days, though this rises to 97.2% within 30 days. One of the worst performing agencies is apparently the Department of Health, managing only 23.1% at 20 days and 75.2% at 30 days.

With the Government payment policy soon to change to 20 days, it appears that some agencies will have to step up their game in sticking to the payment terms.

Nevertheless, the Government survey results should be regarded as an encouraging step in the right direction.

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