COSBOA calls for a prompt payment code so small businesses are paid on time

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One of the nation’s peak small business associations is calling on politicians to unite behind a voluntary prompt payment code to ensure small businesses are paid on time.

Late payments are a major issue for small business owners, with data suggesting many companies wait more than 50 days to receive money for work they’ve already completed.

Earlier this year, it was revealed supermarket giant Woolworths was moving towards paying most of its suppliers within 60 days, despite its own debtors having to cough up money within a 30-day timeframe.

The Council of Small Business of Australia says enough is enough and is calling on politicians from all sides to unite behind a voluntary code of conduct that sets out prompt payment terms.

The United Kingdom has implemented a prompt payment code, with a panel of business representatives able to remove the names of signatories if they are found to have delayed paying a supplier.

The UK code is voluntary and aims to make 30-day payment terms the golden standard. So far more than 1000 companies have signed up.

Peter Strong, chief executive of COSBOA, says Australia should introduce a similar system in order to shine the spotlight on big companies that make late payments.

“There are times when you can’t pay [on time], but what we want from government is to get it going,” Strong told SmartCompany.

“It should be an industry-run, voluntary code. Coles and Woolies will have to sign up and pay on time, otherwise why bother? The government pays on time generally, but all agencies should be signing up and saying yes, we’re going to be good payers.”

Strong says he is also calling on big business to also get behind a voluntary prompt payment code.

“We want recognition of those that do pay on time,” he says.

“We want to change the culture [around prompt payments]. It will take time, but we want those who aren’t a good payer to not necessarily get an automatic stamp of approval.”

Gary Gray, the Labor MP who was small business minister from March to September 2013, released a discussion paper on a proposed ‘Prompt Payment Protocol’ three years ago but the idea has not gained traction since that time.

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Peter
Peter
4 years ago

Hmmm…..Borderline playing with the open commercial market. All business need to manage towards a positive cash flow situation, which is difficult because its about change their behaviours thus impacting the customer’s payments. I would suggest a panel such is described makes a business weaker in its organizational management.

Justin Tyme
Justin Tyme
4 years ago

Great in theory but he inertia in big business administration makes this proposal a costly exercise. If they speed up, the chance of internal fraud is increased so they slow down and double check everything.

Alistair Lamond
Alistair Lamond
4 years ago

Supply chain inefficiencies cause the majority of these payment delays. Big corporates generally see investment into payment and invoice processing as a low priority especially when these delays give them more free cash flow. A more effective and important initiative is reform for electronic invoicing. Mandating all transactions to be processed online via electronic platforms will quickly improve cash conversion cycles and transparency.