Greens take up payment times fight for SMEs with a law to punish late payers

The Australian Greens will seek to legislate on late payments for SMEs, saying the Liberal government has no demonstrated track record in helping small businesses.

On Friday morning Tasmanian senator and Greens spokesperson for small business Nick McKim announced plans to introduce legislation that will result in penalties for those that don’t pay small and medium businesses for their services with 30 days.

The legislation would apply for contracts involving an SME with annual turnover under $10 million and a larger company with turnover over $25 million, or a government agency. Senator McKim tells SmartCompany the Greens want to release draft legislation to get community and stakeholder input and give the bill the best chance of getting up.

“We want to take the lead, but we’re genuine about getting this through the Parliament and in a way that Parliament can support it,” McKim says. 

“Legislation would provide greater certainty in terms of cashflow, which would then see more startups and small businesses [launching].” 

There’s been support across the board for more to be done about late payers after the Small Business and Family Enterprise Ombudsman Kate Carnell undertook an inquiry into the impact of late payments on SMEs at the end of 2016.

While Carnell says the evidence shows the problems cannot be solved without legislation, the 2017 budget was conspicuously quiet on the issue.

On Monday, the Business Council of Australia revealed a new initiative to encourage larger companies to pay Australian small business suppliers within 30 days of receiving an invoice, however, the code is voluntary.

McKim argues that despite messaging for the Liberal Party that it supports small businesses, its approach to SMEs throughout this period of government shows this not always been the case in reality.

“They do say they’re the champions of small but that’s rarely borne out in action,” he says, claiming the government needed to be dragged “kicking and screaming” towards the idea of legislation for an effects test, while the Greens supported this idea from the beginning.

“Ultimately the Libs in particular are a party for big corporations,” McKim says. 

As freelancing rises, legislation is key

The push for a legal solution to late payments continues to gain momentum, with SMEs telling SmartCompany a policy like New York’s new laws to protect freelance workers could only benefit early stage businesses in Australia.

Serial entrepreneur Taryn Williams, founder of WINK Models and theright.fit, says given the rise of the freelance economy in Australia, cementing payment times now will only help the community in future.

“We do see so many moving to freelance style work and to do that and make that viable, there does need to be some kind of guidelines, to put people in stronger negotiating positions [with big businesses],” Williams says. 

WINK Models has a commitment to pay the models on its books within seven days, and Williams says her experience running a business has shown some bigger companies have payment terms as long as 90 days from the end of the month an invoice is issued.

“We had to become incredibly adept at managing cashflow,” she says. 

“What we find is that some of the large organisations have such a strong negotiation power, and they say, ‘We don’t pay for 90 days. Don’t like it, don’t work with us’. Obviously that has a flow-on effect.

“I think it would be really fantastic [to legislate] and it would have the backing of most small businesses.” 

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