Cookies - Timelio uses cookies to offer a better browsing experience

AGREE LEARN MORE
×

Introducing the Payment Times Reporting Scheme

Payment Times Reporting Scheme

Payment terms to small business have become a contentious point and grabbed the attention of Parliament to intervene. Australian businesses have made a habit of paying their suppliers late. According to the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) 53% of invoices are paid late with an average of 23 days overdue. This equates to $115 billion paid late each year, an impact of $52,000 for every small business in Australia.

Now, more than ever, we understand the importance of cash flow and the crippling effect it can have on businesses. Cash flow is the number one reason for business failure and payment terms are a major contributor.

Helping small businesses get paid on time has been a key focus for Parliament and in October 2020 a bill was passed to help bring this to the forefront.

The approved scheme to be rolled out on 1 January 2021 is known as the Payment Times Reporting Bill 2020 and has a significant impact on how large businesses pay their suppliers. Here is what you need to know:

What is the Payment Times Reporting Scheme (PTRS)?

The PTRS aims to improve payment times for small businesses by enforcing large businesses and large government enterprises (reporting entities) to report their small business payment terms and times. These reports will be available on an online public register for everyone to see.

The scheme will:

  • Increase the transparency around reporting entities payment performance
  • Promote good payment behaviours by disincentivising large businesses to pay late due to public disclosure
  • Help small businesses make better informed decisions about who to do business with
  • Enable small business suppliers to get paid quicker

How Does the PTRS Impact Small Businesses?

Small businesses do not have to do anything for the PTRS to operate. Small businesses that do not wish to be included in the scheme can opt out by accessing the Payment Times Reporting System using their MyGovID.

Who is Required to Report?

To be a reporting entity under this scheme, entities must have annual income of more than $100 million and be a Constitutionally Covered Entity (CCE). Other CCE entities such as medium businesses and charities can volunteer to be covered by the scheme.

Entities will be required to self-identify as a reporting entity and it is estimated that this scheme will cover 12,000 entities.

The diagram below outlines which entities are required to report:

Payment Times Reporting Scheme

How Are Small Business Suppliers Identified?

The Government has introduced the Small Business Identification (SBI) Tool to enable reporting entities to easily identify their small business suppliers for reporting under the scheme.

Reporting entities will upload a file of their supplier ABNs and the SBI tool will identify which are classified as a small business. The tool scans a Government database of medium and large businesses that have been compiled using commercial information and records and identifies small businesses by exception.

What Are The Reporting Requirements And What Gets Published?

Reporting entities will be required to provide a report for each six months of the income year within three months of the reporting period.

The Government will publish the reports twice a year on an online public register known as the Payment Times Report Register. The published report will not contain any specific details of the small businesses.

The report will include such information as:

  • Name and ABN
  • Business description
  • Reporting period
  • Statement of standard payment terms
  • Proportion of small business invoices paid during the period
  • Proportion of all procurement from small businesses

What happens next?

A few key dates that all small and large businesses should be aware of for this important piece of new legislation:

  • December 2020: Self-registration opens for reporting entities and SBI tool becomes available
  • 1 January 2021: PTRS commences
  • 1 July 2021: First reporting window opens and reports become available to the public

The introduction of PTRS will further encourage the adoption of supply chain management initiatives as the increased level of accountability for payment terms disclosure will change the way we think about payment terms. Ultimately, it is expected to improve payment outcomes for Australia’s 3.5 million small businesses by creating transparency around the payment terms and practices of large businesses.

This change brings a focus on understanding all characteristics of the supply chain such as size, terms, location, spend and the impact this has on large businesses and their supply chains.

For more information about PTRS or supply chain management strategies, contact the Timelio team at info@timelio.com.au or on 1300 38 63 63.

Originally published by SmartCompany

Send this to a friend
Bitnami