The code is an initiative of the Business Council of Australia (BCA), which believes that it will “in some case… more than halve payment times” and help improve the viability small businesses, while also enhancing their ability to create jobs.
The BCA first proposed the code in its submission to the Australian Small Business and Family Enterprise Ombudsman’s Inquiry into Payment Times and Practices. In her final report on the inquiry, the ombudsman, Kate Carnell said large organisations had effectively been using small business suppliers as “as cheap form of finance”. However, she described the idea of a voluntary code as “soft measure”. She added, “While voluntary codes… provide an option for businesses to signal their good intentions it is only the power of legislation which will compel businesses to meet payment standards and address late and extended payment times.”
The BCA has disagreed with this stance, stating “a voluntary, industry-led effort to drive change in payments culture and practices should be given time to work before any consideration of regulation, which would impose extra costs on all business and taxpayers. We need a culture of cooperation, not compliance.”
Cloud accounting provider MYOB was a founding signatory and had previously called for a voluntary payments code to ensure small businesses are paid on time.
“MYOB played a significant role in bringing the code to fruition both through a close association with the BCA and by employing the code several weeks prior to its official launch,” said John Moss, MYOB’s chief strategy officer. “We have long believed in the importance of timely payments to small business and are very pleased so many other businesses understand the importance of it.”
Moss said that by ensuring their suppliers are paid promptly, signatories will play a role in “keeping the economy moving – and that’s a positive for all”. He continued, “Companies of all sizes are deeply connected and each have major roles to play in supporting the local economy. Late payments slow down cash flow for all, creating a trickle-down effect. Big corporates will benefit if we can introduce a culture of prompt payments into our business community.”
Moss said that while the code isn’t enforceable, it ensures ‘equal and fair business practices are top of mind’ for signatories in their dealings with small business suppliers: “We believe the nature of the voluntary code will encourage cooperation, understanding and cultural change.”
The definition of ‘small business’ adopted by the code covers Australian business with annual turnover up to $10 million or with fewer than 20 employees. Asked whether a signatory would be committed to paying an invoice within thirty days if the supplier’s turnover begins to exceed $10m and they employ more than 20 staff, Moss replied: “Businesses are signing up on a voluntary basis and it’s a show of goodwill to abide by this timeframe for any business partner, no matter what size.”
According to the BCA, signatories to the Code commit to:
- Pay small business suppliers within 30 days (subject to conditions)
- Pay all suppliers on time
- Provide clear guidance about payment procedures to suppliers
- Work with suppliers to improve invoicing and payments practices
- A process for resolving payment disputes and complaints (see link to guidance note)
- Basic reporting on company policies and practices in place to comply with the Code.
For more information about the code, including the signatories, head to the BCA website.