A piece of legislation came into being on the 1st of January this year that will have major ramifications for small businesses in Australia.
The Payment Times Reporting Bill 2020 established the Payment Times Reporting Scheme, which requires businesses with an income of more than $100 million to report on their payment terms and practices for their small-business suppliers twice a year. The first submission of Payment Times reports is due by 30 September for businesses meeting the criteria.
It should be noted that while it will be compulsory for businesses to report, there are no powers to enforce payment under the regime.
Nevertheless, the introduction of the scheme has created several advantages for small businesses such as:
- Greater transparency around the payment performance of large businesses, helping small businesses decide who to trade with.
- More incentive for large businesses to pay on time now that they can be ‘named and shamed’.
The changes essentially mean that big businesses are less likely to take advantage of small businesses and use them like a bank in delaying payments. This widespread practice has had disruptive effect on the cash flows of many small businesses, restricting growth and even forcing some businesses to close down.
However, there is an issue around implementation, with many large businesses not yet having integrated the reporting changes into their accounting systems.
At CreditorWatch we identified the need to report customer payment times to our members some time ago. The reporting scheme reinforces the market demand for such data. Our CreditorWatch suite of risk management tools including RiskScore and our new Payment Rating facility provide important visibility for our members, to understand the average payment times of businesses that they are engaged with.
RiskScore is the most predictive, accurate and transparent credit scoring and rating product in the market, keeping you updated in real time. It can also provide a 12-month payment history snapshot of a business. This data has been collected via MYOB and Xero accounting package integration with our CreditorWatch customers and data from our DebtorLogic ATB analysis tool. Via this data stream we are collecting over 10 million trade lines each month, which can inform our CreditorWatch platform users of the average payment times of both large and small entities.
Payment Rating, launched on 1 July this year, is CreditorWatch’s new tool to enable small businesses to assess their exposure to slow paying debtors. It draws data from accounting software and aged trial balance (ATB) payments systems to assign companies an ABCDE rating for their time to pay creditors.
Get in touch with Hilbert to hear more about these products at firstname.lastname@example.org.