Small business subcontractors in New South Wales could soon be paid faster if a new pilot program being run by the government is adopted across the state.
Small business ombudsman Kate Carnell has welcomed the launch of the pilot program, which requires large businesses that have a contract with the NSW government to pay their own suppliers and subcontractors within 20 days.
The program is being trialled with several large businesses and will end in June. It is expected to be applied state-wide after this time.
The policy would extend the state’s existing ‘NSW Faster Payments Policy’, which was introduced in 2018 and requires registered small businesses with government contracts to be paid within five business days.
“We want to do better when it comes to getting small businesses paid on time and this pilot program is the first step in the journey to making life easier for those small business subcontractors that supply goods and services under NSW government contracts,” said NSW Small Business Minister Damien Tudehope in a statement.
Carnell said the NSW government’s approach to ensuring small businesses are paid faster “should be considered the benchmark for governments at all levels”.
“If NSW can do it, there is no reason why it can’t apply across the board,” she said in a statement.
Carnell said improving payment times is crucial as small businesses continue to deal with, and recover from, the economic effects of the COVID-19 pandemic.
“We know that small businesses, particularly those hardest hit by the COVID crisis, urgently need cash flow,” she said.
A number of other states have also recently committed to faster payment times for small businesses.
In November, the Victorian government committed to paying all small business suppliers within 10 business days from January 1, 2021, for contracts under $3 million.
The Queensland government’s policy is to pay invoices within 20 calendar days for small businesses with fewer than 20 employees, with penalty interest applied to invoices paid after this time.
The Western Australian government has also introduced a 20-day timeframe for payments under the value of $1 million.
At a federal level, the Morrison government has committed to paying supplier invoices within five business days, starting on January 1, in cases where e-invoicing is available.
Meanwhile, the federal Payment Times Reporting Scheme came into effect on January 1, which requires businesses with more than $100 million in annual turnover to report their small business payment times and supply chain financing arrangements.
These reports will be published twice a year on a public register, with the first publication due in July.