Big businesses sign up to SME prompt payment code

More than 30 big businesses have already signed the code.

Business Council Australia (BCA) has launched a new payment code that encourages large organisations to agree to prompt payments for SMEs.

This comes at a time when poor cashflow is one of the biggest problems facing the country's SMEs. Figures from the Australian Securities and Investments Commission showed inadequate cashflow and high cash use were the leading causes of corporate insolvencies in 2014-15.

"Trade between small, medium and large businesses is valued around $520 billion per year."

Late payments are one of the primary causes of cashflow issues, and big businesses are often the main culprits when it comes to settling debts on time.

The latest data from Dun & Bradstreet, published in late May, found that the average late payment time for invoices was 15.3 days. However, this figure climbs to 19.4 days for large organisations.

Late payments are now at their highest rate in over two years. It's unsurprising, therefore, that BCA is calling for the country's biggest businesses to become voluntary signatories of its code.

How does the code work?

The Australian Supplier Payment Code is an industry-led scheme whereby signatories agree to pay small businesses within 30 days of receiving a correct invoice.

In addition, organisations will:

  • Offer clear guidance about payment processes;
  • Work alongside suppliers to optimise invoicing and payment processes;
  • Commit to a payment dispute and complaints resolution system; and
  • Provide basic reporting on company policies and practices to ensure compliance with the code.

Some of Australia's biggest names have already signed up to the code, including Rio Tinto, Woolworths, Telstra and the big four banks of Westpac, Commonwealth Bank, National Australia Bank and ANZ.

Cashflow management and WMC Accounting. Late payments can cause significant cashflow problems for SMEs.

"Although average payment times have fallen across the economy, many small businesses still report that they are facing unsatisfactory delays in payment of up to 120 days," said BCA Chief Executive Jennifer Westacott.

"Trade between small, medium and large businesses is valued around $520 billion per year, so the whole country benefits when we work together more productively."

Ms Westacott also thanked the Victorian government, which had significant input when designing the code. She said Minister for Small Business, Innovation and Trade Philip Dalidakis led "considerable efforts" to ensure organisations in the state are paid on time.

Maximising cashflow management

The code's launch will likely come as good news to small businesses in Geelong, helping them maintain cashflow and prevent late payments from crippling their operation.

However, organisations that would like further assistance could benefit from cash management and forecasting services, as well as a range of finance options. Discuss your business advisory needs with a member of our team at WMC Accounting for more information.

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