Sunday, June 16, 2024

Ombudsman welcomes Payment Times review

The Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, supports the call to overhaul the Payment Times Reporting Act and welcomes recommendations to make the data more useful for small business.

“Finance is the oxygen of enterprise. Cash flow is vital to the survival of small and family businesses, yet this sobering review by Dr Craig Emerson finds there has been no significant improvement by big business to pay their small business customers in a timely way,” Mr Billson said.

“The original intention of the Payment Times Register was to improve the performance of big business but it has so far failed. Dr Emerson has produced a thoughtful road map to get this ambition back on track.”

The review was released by Small Business Minister Julie Collins and Mr Billson commends Dr Emerson and the review team for their engagement, rigour and perspicacity.

“Almost 40% of the requests for assistance to our office relate to payment times and payment disputes and as Dr Emerson has noted, late payments are a major source of financial and emotional stress for small-business owners and have flow-on consequences throughout the economy,” Mr Billson said.

“Sadly, Dr Emerson’s key finding aligns with what we have been saying, that the performance of many big businesses in paying small businesses has been woeful.”

Dr Emerson’s report finds: ‘there is no empirical evidence of a significant improvement in the payment terms and times of large businesses in respect of their small-business suppliers’.

It also says: ‘Large businesses that do not pay their small-business suppliers quickly are using their market power to obtain a cashflow advantage over small-business suppliers, regarding them as a cheap source of finance’.

“Dr Emerson’s call for an overhaul of the ‘poorly functioning’ and ‘almost useless’ Register constrained by the legal design, aligns with our recommendation to the inquiry for the Register to provide meaningful information that can easily be understood and applied by small business, regulators and the community,” Mr Billson said.

“We agree with Dr Emerson the Register has ‘untapped potential’ that can be realised through the reforms he has suggested to deliver more accessible, accurate and useful information that will give big business an incentive to lift its game.

“ASBFEO is the only organisation that has dedicated time and resources to unpack the current complicated data-sets and tell the grim story of poor payment performance and a lack of meaningful improvement since the Register was established,” he said.

“Off the back of our work to analyse and communicate the economy-wide big business payment performance to their small business suppliers, we have championed a ‘good business pays’ campaign approach modelled on and informed by the UK experience and are well placed shine a spotlight on individual business performance.

“We particularly note that some big businesses told Dr Emerson’s review they wanted to be able to compare their performance against others,” he said.

“Given that desire, we particularly welcome Dr Emerson’s recommendation to ‘foster a culture of prompt payment’ through an explicit responsibility being given to ‘publicise the worst and best payers’.

“We are ideally placed to bring into operation a “name, proclaim and shame” scheme that drives better payment performance in support of a more effective and reformed Register,” Mr Billson said.

As Dr Emerson’s review says: ‘The slowest payers would be named and shamed, while the fastest payers would be named and praised. Publicising the worst and best payers uses both reputational sanction and reward to influence the payment practices of businesses, since the reputation of a business matters.’

“Celebrating those big businesses that do the right thing will recognise their timely payment performance and put pressure on those with poor payment records. There are still too many big businesses who make small businesses wait an astounding 120 days or more to be paid,” Mr Billson said.

“A similar system operates in the UK and has been highly effective and has made paying small-business suppliers quickly part of positive corporate reputations and the environmental, social and governance (ESG) obligations of large businesses.’”

Mr Billson said he also supported other recommendations in the review to better protect the rights of small businesses regarding unfair trading practices and unfair contract terms, facilitating the inclusion of a dedicated small business channel into the Australian Government’s proposed Designated Complaints function and increasing the adoption of e-invoicing.

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