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Payment Times Reporting Scheme – what you need to know

BlogYour business By Duncan Khoury – 03 November 2020

The Australian Senate passed the Payment Times Reporting Bill 2020 in September 2020, and it will take effect on 01 January 2021. 

What is the Payment Times Reporting Scheme?

One of the major impacts of the pandemic for small businesses has been the increase in late payments. According to Creditwatch, the average late payment is now made 11 days beyond the due date, impacting cash flow for Australian businesses across most industries. 

Late payments have significant consequences for small and medium businesses in particular, restricting both cash flow and the business’s ability to survive, invest and grow. The Payment Times Reporting Scheme addresses this issue to improve payment timeframes for smaller businesses.

The bill seeks to create transparency around when large organisations pay their smaller business suppliers. Under the legislation, they’ll need to report every 6 months and make their reports public. The government expects this transparency to motivate large organisations to pay their suppliers on time. 

What does the legislation require? 

For larger businesses, the legislation goes beyond reporting obligations. It also provides clear guidelines on what it considers ‘large’ or ‘small’ for these regulations. 

Australian businesses whose annual turnover is $100M+ will need to pay suppliers whose turnover is less than $10M within 30 days of their initial invoice. 

Currently, companies that fail to pay small businesses within 30 days don’t face any penalties for it. The new legislation introduces penalties that include ‘naming and shaming’ and fines for companies that don’t report. The scheme will be administered by the Payment Times Reporting Regulator, who will publish the names of offending companies in a report called the Payment Times Reports Register. 

What does the Scheme mean for your business?

The effect of the Payment Times Reporting Scheme on your business depends largely on your turnover. 

If your organisation has a turnover of more than $100M, now’s the time to get a plan in place. You’ll need to assess your working capital gap and identify any extra liquidity you’ll require to comply with the new legislation. And because traditional funding is likely to remain tight for the foreseeable future, you may need to consider alternative funding sources.

If you’re a smaller business with $10M or less turnover, the changes are nothing but positive. You can expect payment within 30 days of your initial invoice, and you’ll benefit from any increase in your cash flow. 

How can Octet help?

If your medium to large business needs financing to meet the new regulations, we can help. Our Trade Finance solution lets you settle your supplier invoices upfront, then repay the cost at a later date. Plus, our solution does more than just help you to meet legislative requirements. You’ll also benefit from:

  • keeping your balance sheet in check
  • improving relationships with suppliers by paying them earlier
  • being able to access alternative funding in addition to any regular bank funding

Want to know more?

If you need financing to help you comply with the upcoming regulatory changes, get in touch. We can talk through your needs and tailor a solution that works best for your business structure and supply chain. 

Talk to us today.