The report by Dr Craig Emerson which reviewed the present Payment Times Reporting Act has been released by the Small Business Minister Julie Collins.
The review called for an overhaul of the Payment Times Reporting Act alongside recommendations to make the data more useful for small business.
The Australian Small Business and Family Enterprise Ombudsman Bruce Billson expressed his wholehearted support to the review’s findings saying, “Finance is the oxygen of enterprise. Cashflow 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,” Billson added. “Dr Emerson has produced a thoughtful road map to get this ambition back on track.
“Almost 40 per cent 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,” Billson continued.
The report noted that there was “no empirical evidence of a significant improvement in the payment terms and times of large businesses in respect of their small-business suppliers”.
It also stated that “large businesses that do not pay their small-business suppliers quickly are using their market power to obtain a cashflow advantage over small-business suppliers, regarding them as a cheap source of finance”.
The Ombudsman noted that the review’s key finding aligns with its long-held assertion that the performance of many big businesses in paying small businesses has been woeful.
“Dr Emerson’s call for an overhaul of the ‘poorly functioning’ and ‘almost useless’ Register constrained by the legal design, aligns with our recommendation to the inquiry for the Register to provide meaningful information,” Billson said.
“We agree with Dr Emerson the Register has ‘untapped potential’ that can be realised through the reforms he has suggested to deliver more accessible, accurate and useful information that will give big business an incentive to lift its game,” he added.
The review recommended that the slowest payers be “named and shamed”, while the fastest payers would be “named and praised”. “Publicising the worst and best payers uses both reputational sanction and reward to influence the payment practices of businesses, since the reputation of a business matters,” the report explained.
“We are ideally placed to bring into operation a ‘name, proclaim and shame’ scheme that drives better payment performance in support of a more effective and reformed Register,” Billson said. “Celebrating those big businesses that do the right thing will recognise their timely payment performance and put pressure on those with poor payment records. There are still too many big businesses who make small businesses wait an astounding 120 days or more to be paid.”
The Ombudsman noted that 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 (ESG) obligations of large businesses.
Billson also expressed support for the other recommendations in the review to better protect the rights of small businesses regarding unfair trading practices and unfair contract terms, facilitating the inclusion of a dedicated small business channel into the Australian Government’s proposed Designated Complaints function and increasing the adoption of eInvoicing.
