Small businesses in Australia are struggling to get paid on time and the government is taking notice. On Jan. 28, The Australian reported Sen. Pauline Hanson's discussion to take legislative measures to require businesses to pay their small business suppliers in a specific timeframe, citing concerns of delayed and late invoices.
The issue was brought before the Labor and Coalition; however, this isn't the first initiative to address late supplier payments. The country's Small Business and Family Enterprise previously stressed the disruption to lenders' cash flow in the public sector. In response, the government sped up the invoice process to 10 days for payments under $1 million—effective July 2018—which allows for government suppliers to get paid within 20 days.
Yet, payment woes remain a concern for small businesses. Hanson's proposal would require invoices to be paid within 20 days of the end of the month unless otherwise specified.
"With more than two million small businesses across Australia, cash flow is critical," Hanson said in the article. "The inquiry identified [that] businesses with a lack of cash flow reduced their ability to operate appropriately, and was the leading cause of business insolvency. Small- and medium-sized businesses should not be used as a cheap source of finance through extended or late payment terms."
Billing disputes and customer payment policies were the two main reasons behind open account payment delays in Australia, according to FCIB's International Credit and Collections Survey. Respondents to the June 2018 survey said "customers didn't account for bank processing times" and "we normally have to give several reminders before getting paid."
The majority of respondents (95%) said they extended credit in the country, with 44% setting 31- to 60-day payment terms. The average days beyond terms was 9.6 days.