SMEs can now expect invoices up to $1 million paid in 20 days
The Government will now pay small businesses invoices 10 days faster.
The Turnbull Government has announced that any small business providing goods and services to the government will not be required to wait for their invoices to be paid. In a win for small- to medium-sized enterprises (SMEs), the government will now pay invoices for contracts up to $1 million within 20 days. This is a reduction from the current 30-day policy.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell has welcomed the announcement, which she described as "game-changing" for businesses that provide services to the government.
“Cash flow is king for small business and this will make a huge difference," she said. “It will save money on interest payments, boost confidence and free up capital for reinvestment.”
The new government policy will apply to 6,800 Australian small businesses that work with the government and is a response to the ASBFEO report into payment times and practices.
Small businesses have struggled with long payment times for a while, with MYOB finding that it affects as much as 70% of SME's profits. Small businesses have been found to have to wait up to 60 days for payment, and anecdotally even as long as 120 days from some larger suppliers.
CEO of MYOB Tim Reed congratulated the government announcement but said there is still work to be done.
"MYOB has long called for a national prompt payment protocol to pay small businesses on time. MYOB research has found that the majority of Australian small businesses are hurting both personally and financially due to late customer payments."
"It’s great to see the Federal Government taking the first step to ensure all businesses are paid on time. MYOB continues to call on the Government and businesses to implement a national prompt payment protocol as a matter of urgency.”
A Fair Payment Code of Practice has been introduced in Victoria in order to combat the long payment times experienced by SMEs and brings payment times down to 30 days. It's a voluntary code based on the Prompt Payment Protocol in the UK but is currently only available in Victoria.
While there is evidence to suggest that payment times are getting faster, this isn't the case for every business and many small businesses are still being affected.