“Concerning”: Payment times watchdog to investigate as small businesses wait an average of 35 days for reimbursement

Australia’s payment times watchdog says it will intensify its focus on big businesses in 2023, after the release of “concerning” data showing the average payment time to small businesses barely budged in 2022.

Fresh data from the Payment Times Reporting Regulator, released Monday, shows the median payment time from big businesses to smaller operators was 30 days between January and June 2022.

That figure was unmoved from the median time recorded in the six months leading to the end of December 2021.

The average payment time actually crept upward between the two periods, rising incrementally from 35.61 calendar days to 35.66.

Mary Jeffries, assistant secretary of the Treasury’s Payment Performance Branch, says the latest report was a wake-up call for those hoping to accelerate payment times.

“After three reporting cycles, it is concerning that register data indicates payment terms and payment performance have not materially improved since the commencement of the scheme,” she said.

Actual payment times were largely unchanged, the report adds.

“Changes identified indicate that while invoices previously paid between 31 and 90 days may now be getting paid in 30 days or less, the change is relatively small (<3% total change),” it said.

“Even less improvement was identified in the proportion of invoices paid in 91 days or more (<0.1% total change).”

Source: Payment Times Reporting Regulator

Moving into the new year, the government body will boost its engagement with reporting entities and stakeholders “to help us better understand barriers to compliance,” Jeffries said.

The watchdog also intends to strengthen its public Payment Times Reporting Register, an online tool that ‘names and shames’ the big businesses most likely to leave small suppliers in the lurch.

“Because payment practices have not improved across recent reporting periods, we will also explore how the register can be used by small business suppliers, investors, advisers, supply chain managers and other stakeholders to incentivise improved payment performance by large businesses,” Jeffries said.

The data also provides a glimpse at how profound late payments can be for the small business sector: 73% of reporting entities made payments to small businesses in the latest reporting period, with those transactions representing 31% of total procurement.

Delaying the flow of payments to local and independent operators can put immense pressure on small businesses, according to Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Bruce Billson.

“A vast number of big businesses just aren’t meeting the mark and it’s causing needless harm and cashflow challenges for small and family businesses who are waiting too long to have their invoices paid,” Billson said of the new report.

“Delaying the timely payment of your small business suppliers just puts pressure on other parts of the economy when cashflow is critical for those smaller enterprises and is nothing more than a crude display of power imbalances,” he added.

Analysis of the data conducted by ASBFEO found big businesses in the manufacturing, construction, and retail trade fields were the least likely to pay their small business partners within 30 days.

The Payment Times Reporting Regulator’s intention to boost engagement comes as Treasury conducts a broader review of the scheme’s effectiveness.

Announced in December, the independent review intends to investigate if the Register is helping small businesses make informed decisions about which firms to work with.

“What we do want to do is to make sure that small businesses are not carrying an unfair burden when it comes to payment times,” Minister for Small Business Julie Collins said at the time.

That inquiry will hand down its report in June this year.