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What regulations are in place to help tackle late payments?
When it comes to payments regulations, the Australian government has been making the right noises but so far little action has been forthcoming, at least none that has had a serious impact on the time businesses have to wait for payment.
“The Federal Government has a commitment to pay small businesses within 30 days,” says Heather Smith, Chartered Accountant. “The current government have suggested they will require large businesses to publish information on how long they take to pay small businesses. I am not sure how much this would help, but it would be a talking point.”
Kylie Parker, Director, Lotus Accountants Pty Ltd, agrees: “Definitely the push to reduce payment terms from large companies to smaller businesses, this will have a huge impact.”
Tim Hoopmann, CEO of Cornerstone Bookkeeping, also sees large businesses as being the ones that need to change – or be forced/encouraged to do so. “Large corporations who deal with small business [should agree] to much shorter payment terms and paying within those terms.” This doesn't necessarily mean that the larger corporations are acting out of greed or disdain. “Often it is the challenges with a corporation’s payment systems and process that create delays in processing payments,” he says. “Greater empathy for small business would be a great start.”
Where regulations are lacking, businesses must be creative in their approach to late payers. Keep on good terms with your customers, especially their accounts departments. Whenever possible, move your customers to 'pull' payment methods such as Direct Debit via GoCardless, which allow you to take payment without the need for authorisation every time. Digitised billing and digitised payment methods take much of the manual work out of payment. That's a good thing, since most payment delays are due to people.
It's not just payment processes that could benefit from the introduction of legislation. Sarah Stein of Miss Efficiency Bookkeeping, focuses on business owners themselves. “To start a business in Australia, on the most basic level you only need to have an ABN and you’re good to go. [...] Whilst this is great for the convenience and lack of red tape in getting started, I think it’s terrible in that there’s no ‘business’ qualifying criteria. I would love to see some compulsory education to business owners around financial literacy and business acumen before the ABN is issued.”