Government failing to pay small businesses on time: data

The government has become worse at paying small business contracts on time, with data released today showing 96.8% of invoices were paid within 30 days during the 2011-12 year – down from 97.7% recorded during 2010-11.

While the department of financial services recorded the highest marks, the departments of parliamentary services and agriculture have recorded the worst on-time payment rates.

The data also comes alongside figures released by Dun & Bradstreet, which show the average payment time in the private sector rose to 55 days in the first quarter – up from 52 in the previous three months.

Small business advocates and payment experts have regularly raised their concerns as to why the payment terms are so long – such delays place huge amounts of pressure on small businesses.

The release of both sets of statistics comes as Canberra is attempting to stick to its 30-day payment policy, which mandates small business clients should be paid within a month.

The figures show 40 agencies participated in the survey, covering 904,000 invoices worth about $3 billion. They show 96.8% of invoices were paid within 30 days, down from 97.7% in 2010-11.

The government says this can be attributed to “improved data collection mechanisms which are providing more accurate identification of small business payments”.

However, agency performance by value has improved – from 89.2% to 94.2%.

While nearly all of the 40 government departments taking part in the survey showed an on-time payment rate of more than 90%, there are some stark differences.

The Department of Parliamentary Services recorded the worst on-time payment rate of just 86.04%, with the Department of Agriculture, Fisheries and Forestry following in second at 90.93%.

By contrast, the Department of Financial Services recorded a 100% record, followed by the Australian Communications and Media Authority at 99.81%, the Department of Industry at 99.66%, the electoral commission at 99.53%, along with the Department of Finance and Deregulation at 99.23%.

The government is set to pay $21,687.38 in late payment interest for 50 invoices, although this figure is set to increase over the year due to a policy which requires agencies to pay penalty interest on payments exceeding 60 days.

Meanwhile, the figures from Dun & Bradstreet show private sector payments have also become a bigger pressure on small businesses, with payment terms rising to 55 days during the first quarter of 2013.

This compares to 52 days in the previous quarter and 53 days a year earlier. Dun & Bradstreet pins the pain on a higher Australian dollar and operating costs.

The issue is set to become even worse, with 56% of business respondents telling Dun & Bradstreet they expect cashflow will be a major issue in the quarter ahead.

Chris Charleson, the head of business finance sales for Bendigo Bank, told SmartCompany this morning dealing with government departments is sometimes a win for small businesses, although it usually means they won’t have any leeway with when they get paid.

‘The clients we’ve had which interact with government departments try and use the usual business influencing discussion points to get their money… but usually government departments are resolute they’ll pay when they pay.”

“The expectation may be you can influence change in that way, but they just can’t.”

As a result, Charleson says dealing with late payment terms necessitates the usual strategy – maintaining a structured and diligent accounts receivable focus.

“In other words, allocating the time and the effort to make those calls as bills and invoices are coming up.”

“Remember, it’s often the companies which ask for payment that receive it faster.”

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