Government pays 96.5% of SME invoices within 30 days

The Rudd Government managed to pay 96.5% of its invoices from small businesses within 30 days during the last financial year, a move praised by industry experts as a major benefit to SMEs.

The Government marketed the acceleration of $16 billion in payments as a move to help businesses during the global financial crisis, when many SMEs were struggling to stay afloat.

The Australian Office of Financial Management was the highest performer, paying 100% of its invoices within 30 days. Among the worst were the Environment and Climate Change departments, which managed to pay just 86% and 77.5% of SME invoices within 30 days, according to the figures.

But Bruce Growcott, partner at Enterprise Advisors, says businesses with government contracts should be pleased at the thought of being paid within a 30-day period.

“I would have thought most normal businesses are not getting paid within 50 days. If everybody could be paid within 30 days they would be very, very pleased. Small businesses will tend to use creditors as a fairly cheap form of finance, and it’s nothing in various industries to be behind 120 days.”

Geoff Webster, managing partner at HLB Man Judd, also says businesses should be content with 30-day payment terms especially during the Christmas period.

“A timeslot of 30 days is fairly unlikely, particularly at this time of year, because what happens is that businesses pay their staff leave and then with no one there the terms get dragged out even further. I think in the current climate a lot of SMEs are very careful about anything that gets much further than 75 days.”

But for those businesses without so much luck, Webster recommends some simple measures to ensure they will actually be paid.

“There are really basic things to do. First of all, as soon as the payment hasn’t been made on terms, they should be on the phone until they obtain an undertaking in regards to the payment. That is the classic way to collect money.”

“It isn’t any good sending letters or emails, you need that voice over the phone because even if you don’t get to the accounts payable team, you’ll be recorded as having called the business. If ringing doesn’t illicit payments, and if there is no positive response, I would be putting it into the hands of commercial debt collectors quickly.”

Webster also says SMEs must avoid the temptation of keeping themselves afloat through shady practices, such as delaying payments to the ATO.

“If you’ve been paying your business by delaying payments to the ATO, then I would suggest that’s not a good move.”

Jason Dwyer, acting head of debtor finance for Oxford Funding, suggests businesses adopt a variety of methodologies such as phone calls and letters in order to receive their payments.

“Obviously debtor finance is a good example, which creates a buffer in the cashflow. Businesses can access a percentage of those funds upfront, which can be a big help.”

Small business minister Craig Emerson said the Government has managed to deliver improvements in payment times, and said the figure was better than the previous Howard Government’s performance.

“Departments have responded to the Government’s requirement that they lift their performance,” Emerson told the Australian Financial Review. “This has been a significant contribution to small business cashflow, interims of the Government leading by example.”

“While we are not perfect, 96.5% is a big number and it’s a record number.”

The best performers:

• Innovation, Industry, Science and Research – 99.7%
• Resources, Energy and Tourism – 98.9%
• Finance and Deregulation – 98.3%
• Prime Minister and Cabinet – 97.7%
• Broadband, Communications and the Digital Economy – 97.2%
• Defence – 96.9%
• Treasury – 96.4%
• Education, Employment and Workplace Relations – 96.3%
• Infrastructure, Transport, Regional Development, and Local Government – 95.4%
• Agriculture, Fisheries and Forestry – 95.3%