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Small Business Commissioner calls for legislation to improve small business payment times in his 2018/19 Annual Report

The South Australian Small Business Commissioner is calling for new legislation to compel big businesses to pay small businesses on time. 

 “Simply it is time for a legislative approach which forces big businesses to not only implement better payment terms but also report on their performance,” Small Business Commissioner John Chapman said.  

“To see businesses having to wait 90 days or more for payment is simply unacceptable – small businesses are not banks for big business.”  

Expanding on his comments in his 2018/19 Annual Report tabled in State Parliament, Mr Chapman said the benefits to small business from improved and consistent cash flow would be immense.  

“There are more than 143,000 small businesses in South Australia and my office consistently deals with issues around delayed payments.”  

Mr Chapman said the State Government should pursue this area with vigour through the Council of Australian Government (COAG) to implement national legislation to force bigger businesses to improve their payment terms.  

The Small Business Commissioner noted that the Federal Government is now seeking to enshrine better payment terms for small business as part of new tender arrangements and is developing a national large business reporting framework to encourage fairer, faster payment times and terms for small business.  

But he was critical that big business was not improving their behaviour in this area. Mr Chapman noted that the Business Council of Australia had implemented a voluntary payment code for its big business members but there is no mandatory reporting requirement in terms of payment performance and the take up by members has been lukewarm.  

“Unfortunately, we need legislation to ensure fairness and to address the imbalance of power between big and small businesses – 30-day terms as a legislated maximum would be a good start.”   At that point, there could be a requirement to pay interest on the outstanding amount after 30 days, similar to that which the South Australian Government is legally required to adopt under its Late Payment of Government Debts (Interest) Act 2013.  

Mr Chapman backed his argument with statistics from accounting software firm, Xero, which has stated that late payments to Small and Medium Businesses are a systemic problem and that their data showed that payments arrive on average 23 days late. Xero calculated the value of “big business late payments to small business at $1.15 billion a year.”  

Mr Chapman said a simple way to address this would be through unfair contract terms law which the Federal Government has committed to improve.  

“Simply you could require that any contract term which has a payment clause outside of 30 days be declared illegal and that the ACCC would have the powers to apply a penalty and, if necessary, prosecute the offending business,” Mr Chapman said.  

The Small Business Commissioner proposed the initial threshold to commence with publicly listed companies and their subsidiaries who would have to report publicly on their payments performance.  

Download the annual report