In a win for business owners, the government has announced as of January 2020 it will pay interest on electronic invoices that are paid past their due date.
The move was announced by finance minister Mathias Corman who said the government would commit to paying contractor invoices up to $1 million, within five days or pay the consequences.
Earlier this year the Morrison government committed to adopting a maximum of 20 days payment terms for any government contracts up to 1 million in an effort to speed up payment times to small business owners. The new policy will see Australia assuming the Pan-European Public Procurement Online framework for e-Invoicing, where five-day payments are the norm.
The policy announcement has been praised by small business advocates as a win for business owners who are often struggling to manage late payments
CEO of Moula, Aris Allegos described the new legislation as a boon for small business.
“The government’s move to encourage electronic invoicing and tighten payment terms will be a boon for businesses working with government and a welcome cash injection for the economy early in the new year.
“Managing cash flow is one of the greatest challenges faced by small to medium businesses; symbolic changes like these improve business confidence and stimulate investment planning.”
The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell has welcomed the announcement describing it as a game-changer.
“The next step would be to apply this to businesses right down the supply chain,” Carnell said.
“Our Small Business Counts report shows that late payments continue to hamper small business viability, with half of all small businesses reporting late payments on 40 per cent of their invoices.
“This policy will improve cash flow for small businesses so they have the confidence and the capital to re-invest.”
Carnell urged business owners to take up e-invoicing to reap the benefits.
“We encourage small and family businesses to adopt e-invoicing and make the most of the benefits that flow from that, including reduced administration costs and fewer processing and handling errors.
“In fact, research shows the Australian economy would benefit to the tune of $28 billion over a decade, if all businesses switched to e-invoicing.”
An MYOB spokesperson described the move as a significant step toward providing small business with the ammunition they need to get paid faster.
“The Morrison Government has been the strongest advocate for reducing payment times and today’s announcement sets an incredibly high but important bar. We hope this ignites a movement toward the wholesale adoption of e-invoicing, a practice we strongly feel will benefit both small business and their customers.”
“Our research consistently shows late payments and cash flow are the key concerns of small business operators. E-invoicing is a major contributor to shortening payment times, increasing financial fluidity and alleviating admin time for this extremely busy group of people.”