The proposal by the Australian Small Business and Family Enterprise Ombudsman for practical measures to improve payment terms deserves support by businesses across the supply chain, the Australian Chamber of Commerce and Industry said today.
Ombudsman Kate Carnell AO has today released the findings of her Payment Times and Practices Inquiry, which include a recommendation for voluntary, industry based payment codes – and a regulatory safety net that would stipulate a maximum payment period.
James Pearson, CEO of the Australian Chamber, said: “The business community agrees that prompt payment is critical for the financial health of many businesses and is an important feature in a well-functioning economy. But we also know that regulation can stifle business and innovation, so should be used sparingly and only after other avenues for achieving improvements are considered.
“That’s why we generally support the Ombudsman’s recommended approach on payment terms. A voluntary code is a sensible approach and we agree that it needs to deliver results, so a period of review is essential to monitoring progress. A code needs teeth to be effective.
“Whether behaviour is governed by a voluntary code or by regulations, we believe invoices from small and medium enterprises should be paid within 30 days (from end of month) or in line with broadly accepted industry standards.
“Australian businesses are trending towards shorter payment times, but there has been a recent deterioration for on-time payment. By international comparisons, Australia is lagging and could improve.
“Ensuring businesses pay their invoices on time will have a positive effect by breaking the cycle where businesses hold off making payments due to their own cash flow being affected by late payments from other parties. This would help make many businesses more competitive.
“We were pleased to offer policy recommendations in our submission to the Ombudsman’s inquiry and it is encouraging to see that the Ombudsman’s recommendations follow the broad intent of our submission.”