The Payment Times Reporting Scheme, which aims to improve payment times for small businesses, needs to be updated to better serve the small business sector, according to an independent review of the Payment Times Reporting Act 2020.
Craig Emerson, who conducted the review, said the federal government should ban unfair payment practices, increase the powers of the Payment Times Reporting Regulator and increase the importance of prompt payment in the Commonwealth procurement supply chain.
Dr Emerson also recommended that the government “foster a culture of prompt payment” among businesses by taking advantage of their desire to protect their reputation. “Paying small-business suppliers quickly should be part of the environmental, social and governance (ESG) obligations of large businesses,” he said, adding that there should be public reporting on “worst and best payers to small businesses”.
Small businesses should be helped to recognise and act against unfair payment-related contract terms, according to Dr Emerson. “Introduce examples of unfair terms relating to payment of small-business suppliers into updated regulatory guidance on unfair contract terms,” he said.
Dr Emerson also said that maximum payment times from big to small businesses should not
be mandated, “given the perverse outcomes” that could result.
Minister for Small Business Julie Collins said the government would consider the review’s findings and recommendations.
Ombudsman supports report
The small business ombudsman, Bruce Billson, supported Dr Emerson’s report.
“Finance is the oxygen of enterprise. Cash flow is vital to the survival of small and family businesses, yet this sobering review by Dr Craig Emerson finds there has been no significant improvement by big business to pay their small business customers in a timely way. The original intention of the Payment Times Register was to improve the performance of big business but it has so far failed. Dr Emerson has produced a thoughtful road map to get this ambition back on track,” he said.
“Almost 40% of the requests for assistance to our office relate to payment times and payment disputes and, as Dr Emerson has noted, late payments are a major source of financial and emotional stress for small-business owners and have flow-on consequences throughout the economy. Sadly, Dr Emerson’s key finding aligns with what we have been saying, that the performance of many big businesses in paying small businesses has been woeful.”
Mr Billson also endorsed Dr Emerson’s plan to publicise the worst and best payers.
“A similar system operates in the UK and has been highly effective and has made paying small-business suppliers quickly part of positive corporate reputations and the environmental, social and governance obligations of large businesses,” he said.
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