While the disruption of the coronavirus pandemic has been extremely challenging for small businesses, there is a silver lining. With a focus on what we can all do to help WA businesses keep their heads above water, payment times are in focus.
For a number of years, I’ve been calling on organisations of all sizes to pay their small business suppliers on time. Late payments have a crippling effect on cash flow at the best of times.
In response to the financial impact of COVID-19 on the small business sector, the Department of Finance has announced it will reduce payment times to its suppliers from 30 down to 20 days. The new timeframes will apply from 1 May for goods and services and 18 May for works, for invoices under $1 million. With the department managing more than $1.25 billion in invoice payments annually, the faster payment times are an effective way to support our economy and keep money flowing.
The State Treasurer has set a target of 1 October 2020 for all other state government agencies to adopt the 20 day timeframe for suppliers of goods and services, for invoices under $1 million, although he encouraged them to implement the improved terms as soon as possible.
Hand in hand with this important development, it’s good to note that many local government authorities (the majority of whom are signatories to our Small Business Friendly Local Governments initiative) have also introduced faster supplier payments in their coronavirus response measures.
With the all levels of government introducing 20 calendar day payment timeframes, the onus is firmly on larger corporates to come to the party.
My fervent hope is that we don’t see more instances of larger corporates using COVID-19 as an excuse to delay payments to their small suppliers.
The best outcome would be for the pandemic to catalyse a permanent shift in corporate behaviour, because faster payment times will help our economy recover faster and benefit everyone.
We are all in this economy together!