Time to pay on time and time to pay say accountants
THE Payment Times Reporting Bill 2020 and Payment Times Reporting (Consequential Amendments) Bill 2020, which are now before Parliament, will go a long way toward helping small businesses that are struggling with cash flow issues once it is passed, according to the Institute of Public Accountants (IPA).
“This legislation will bring greater transparency, requiring businesses with over a $100 million turnover to publish their policies including payment times,” IPA chief executive officer, Andrew Conway said.
“The IPA’s submission to the Senate Education and Employment Committees highlighted a number of key areas to be addressed including the recommendation that legislation should prescribe maximum payment times, preferably 30 days or less.
“Without a prescribed period of time, there will be room for ambiguity or arbitrage which can be easily exploited by large businesses. This reflects the ASBFEO’s review of payment times and practices in 2017," Mr Conway said.
“The legislation sets the path for a new regime of fairness in terms of payment times and practices. This new environment should be reviewed within two years of the legislation to ensure the behavioural change that is a key objective of the legislation has been embedded in our society.
“The Bill prescribes the creation of a Payment Times Reporting Regulator which will be a senior executive employee in the Department. As is the case with other regulators, we advocate that this role should be adequately resourced to instil the importance of the role and to ensure it is effectively meeting the requirements of the function," he said.
“We are, however, concerned that the Regulator can extend the reporting time with no limit to the extension. This is far too broad and open-ended, and we recommend a prescribed time period, say, no more than three months.
“One of the most pleasing things about the proposed legislation is the penalty regime; we believe the penalties prescribed are of sufficient weight to drive the desired behavioural change. Reputational risk should be a key driver of behavioural change.
“The IPA is also pleased that the focus in the legislation’s objectives is on ‘payment terms and practices’. In our view, you cannot have one without the other," Mr Conway said.
“Some large businesses use excuses such as inaccurate invoicing, missing invoices or make changes to contract terms and conditions – anything to extend payment times. It is essential these practices change and if the legislation is successful in bringing this behavioural shift, then the flow-on benefits to small business will be realised."