Last editedMar 20232 min read
The Faster Payments Term Policy is currently specific to New South Wales. The issue of faster payments is being looked at by other states and also by the Federal government. It is definitely worth doing your best to leverage the FPTP where it applies. What’s more, many of the strategies will help to ensure faster payments of invoices in general.
What is the Faster Payments Term Policy?
The Faster Payments Term Policy is a policy set by the New South Wales government. It states that in-scope agencies will be required to pay at least 80% of eligible supplier invoices from registered small businesses within five business days of receipt of a correctly rendered invoice.
Although that statement is short, it contains a lot of important information. Here is a quick rundown of the key points.
It only applies to in-scope agencies
You can find a list of participating agencies on the NSW Small Business Commissioner’s website here. This list is very much still a work in progress. That means you can expect more agencies to be added to it in the future.
In principle, you can still request faster payments from agencies that are not on the list. In practice, agencies that are not on the list are unlikely to be able to handle faster payments at this time.
The target for faster payments is 80%
Keep in mind that the FPTP does not guarantee that you will get paid within five days. It does, however, vastly improve your chances.
Small businesses must be registered
In order to be eligible for the Faster Payments Term Policy, you need to register on the buy.nsw business hub. You can find guidance on the process on the NSW SBC’s website here.
The period to pay is five business days
As explained here, the payment period begins on the business day when the invoice is received. The definition of business days excludes both public holidays and the NSW Government Christmas/New Year close-down period. The payment period ends on the business day that the agency instructs a financial institution to make payment to the supplier.
This last point is a key one to note. The NSW government can only control the time it takes to authorise payment. It’s down to the suppliers to ensure that their payment processing service pays them quickly.
The invoice must be correctly rendered
This may be the most important point of all. If an invoice is not correctly rendered, then the best you can hope for is that it gets promptly sent back for correction. It is not out of the question that it will end up dropping into a black hole. You will only find out about this when you start sending chasers. You’ll then still have to correct the error before the invoice can be paid.
With that in mind, here are some of the key points to check when you are sending invoices.
The correct details for the recipient
When dealing with government departments, this is generally either a central email inbox or a portal. With other organisations, it may be a named individual, and that individual may change. Make sure you promptly update your records if you are informed of any changes.
The invoice date and the due date
There are two reasons why the due date matters. Firstly, it is essentially a polite call to action for the recipient. Secondly, it indicates when you should start chasing up an invoice if it is still unpaid.
If you use accounting software, this can generally be done automatically. You may want a human to take over if the invoice becomes seriously overdue. If you are managing your credit control effectively, this should be very unusual.
The formatting requirements
Invoices are often processed by software packages before being checked by humans. They may therefore need to follow a specific format. Even if they don’t, having clear, logical formatting makes invoices a lot easier for humans to digest.
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