For your business to survive and thrive you must understand the importance of cashflow. Cashflow is greatly affected by the time you give your customers to pay your invoices. Whilst it is common for businesses to give 30-day payment terms, it is often the case that big businesses impose payment terms of 60, 90 or 120 days. As small business owners generally want to have big businesses as customers, they have little choice but to agree, even though it will adversely impact on their cash flow. As a consequence, your business could be profitable, but ultimately destroyed by poor cashflow.
Government has proposed new laws which aim to remedy this imbalance between big businesses and small businesses. The Payment Times Reporting Bill 2020 (Cth) was introduced to the House of Representatives in May 2020. It is intended to be passed later this year and take effect on 1 January 2021.
For the purpose of these laws, “reporting businesses” will be those who have at least $100 million annual revenue or control a business that has $100 million in annual revenue. “Small businesses” are classified as those with annual revenue of less than $10 million.
Put simply, the laws will require any large business or government entity who acquires products or services from small business suppliers to report on the timing of their payments to those businesses. That information will then be made publicly available on an online “Payment Times Reports Register”. When published, it will not include commercially sensitive information and will only show how quickly big businesses pay invoices.
It is hoped that this process will create better transparency and therefore you will be better placed to do “forward cashflow planning” and smooth out the lumps and bumps in the availability of cash needed to keep paying your business’ operating expenses as they fall due.