Victoria launches “Fair Payment” code to drive businesses towards being good corporate citizens

Victoria’s Small Business Minister has not ruled out making the state’s new voluntary code on fair payment times mandatory for all businesses in the state if the government does not see an improvement on the times it takes to clear invoices.

The Victorian Government and Small Business Commissioner have today released details of the Victorian Fair Payment Code, which will come into effect on July 1, 2017. The code will see signatory businesses commit to paying suppliers within 30 days, preparing clear invoices and payment terms, and providing straightforward methods of dispute resolution with suppliers.

“I’m very proud that Victoria leads the way in this area and it’s absolutely within our purview to move to a mandatory code [if no improvements are seen],” Minister Philip Dalidakis told SmartCompany this morning.

However, the government would prefer less red tape in the area and instead wants to build on the local business community’s desire to be good corporate citizens, in the belief that open conversations and commitment in this area from companies of all sizes can result in positive changes for SMEs getting paid on time.

“I think companies today in this day and age are far more aware of their social responsibilities, that’s also about being a good corporate citizens for suppliers,” Dalidakis says.

“From my perspective while I’d love this to be a national code, we’ve seen already, through a conversation with myself and Telstra’s group chief executive, that they’re moving to a 30-day payment window. We can already start to see that outcome.”

The Victorian government has been in conversations about the impact of late payments on SME cashflow and possible solutions for this for the past 12 months, the minister says. The payments code is modelled on a similar policy introduced in the United Kingdom in 2008. The UK’s “Prompt Payment Code” requires signatories to pay suppliers within 60 days, and the code’s compliance board has powers to investigate grossly unfair supplier contracts. 

The Victorian code will aim to establish a community expectation that suppliers are treated fairly in order to help “the mums and dads that often run these businesses”, whose time and resources are drained chasing unsettled invoices, Dalidakis says.

Is legislation the only way forward?

While big businesses like Telstra and Coles have taken steps to ensure smaller operators are paid on time, Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell has previously told SmartCompany that without legislation on payment times in Australia, it seems some multinationals would be unlikely to move away from payment times that are now stretching to up to 120 days.

“I suppose the message from us is these large companies have said to us, ‘all these decisions are being made in head office’,” she said earlier this month.

“It’s the company’s policy that we’ll comply with the law — but if there is no law, then the decision will be for the company.”

However, Minister Dalidakis says Victoria has decided to establish its own code to create an environment where businesses of all sizes behave fairly towards each other, and no company uses money owed to another “for their own cashflow purposes”.

“The fact remains that all businesses actively promote themselves to SME suppliers themselves,” he says.

The Small Business Ombudsman has welcomed the launch of the Victorian code this morning, saying she supports any steps taken to stop bigger businesses from using small suppliers as “a cheap form of finance” by drawing out payment times to more than three months.

“When a business experiencing extended payment times is also hit with late payments it stresses the business further, which can easily put them out of business,” Carnell said in a statement provided to SmartCompany this morning. 

Victorian companies of all sizes are being encouraged to sign up to the code, with the end goal to create a community expectation around prompt payments.

“We’re not going to limit the businesses that want to sign up, whether they’re an SME themselves or a large businesses, all will be encouraged,” Dalidakis says.

Businesses interested in signing up can contact the Victorian Small Business Commissioner here.

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