Victorian Government cracks down on late payments to SMEs

Elizabeth Barry 11 April 2017

sme owner

The state government will be introducing a Fair Payment Code of Practice later this year.

The Victorian State Government has announced a plan to help small businesses get their invoices paid on time - a problem affecting 77% of small- to medium-sized enterprises (SMEs). Minister for Small Business Philip Dalidakis told 3AW's Drive show that the state government will introduce a Fair Payment Code of Practice to encourage larger businesses in Victoria to pay their small business suppliers on time.

"From 1 July this year, we'll introduce a voluntary code that will allow big businesses to sign on to paying their small to middle sized businesses within 30 days of receipt of invoice, and obviously, on receipt of the product or service being satisfactorily provided," Dalidakis said.

This new 30-day period is a sharp drop from the 60- to 90-day - and anecdotally 120-day - terms that are currently in place, effectively locking $19 billion away from small businesses annually, according to research from Dun & Bradstreet.

This new Fair Payment Code of Practice is based on the Prompt Payment Protocol, which was introduced in the UK in 2008, and will be the first of its kind in Australia.

The code, as it is in the UK, will be voluntary, but Dalidakis said it already has support from big business.

"We've had a number of discussions with large businesses. I can tell you that six weeks ago I had a discussion with Andy Penn, Telstra's Group chief executive. As a result of this conversation Andy said that Telstra would implement this across all of their business units by September of this year," Dalidakis said.

While this is a big step forward for small businesses, the initiative will only be implemented in Victoria. Unless a national protocol is put into effect, it will be up to individual state governments to not only design protocols of their own, but get big businesses on board.

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