The Payment Times Reporting Act 2020 came into force on 1 January. It aims to protect small suppliers from the effects of cash flow pressures, due to delayed payments by large customers, and the resulting reliance on costly supply chain finance schemes.
What you need to know
Large businesses, including private, public and government entities, with annual revenues of at least $100m are obligated to report twice per year on their payment practices to suppliers, with annual revenues of less than $10m.
Large businesses automatically qualify for the scheme through tax assessments. They will report on items such as standard payment periods, percentage of procurement from small suppliers, proportion of invoices paid within 20, 30, 60, 90, 120 and >120 days, and supply chain finance arrangements.
Suppliers must register their details via the online Small Business Identification (SBI) tool, to ensure their participation in the scheme. Note, this is not mandatory.
Content from these reports will be made public as of 1 July and come 1 Jan 2022, penalties and fines can be applied to non-conforming entities.
Shaming of poor performance should be anticipated, as the media and public will have ready access to the data.
Through the Payment Times Reporting Scheme the government has, in essence, created a dating app for the B2B sector. Its goal is to improve the accuracy of customers’ ‘profiles’ so that poor behaviour and practices towards suppliers becomes transparent. Armed with such insights, it is hoped that suppliers ‘swipe left or right’ more wisely when it comes to selecting partners (customers), and furthermore, that customers will be more readily inclined to do the right thing.
However, this is just the beginning. Throughout 2021, both suppliers and customers should prepare for the following:
1. The Unfair Contract Terms Act: Expected to take effect in the second half of the year and aimed at providing unprecedented levels of contractual protection for B2B suppliers with revenue of less than $10m. Standard form contracts and clauses that represent an abuse of market power will be deemed illegal if they force small suppliers into unfair and unreasonable supply situations. Fines and penalties will apply once again and public reporting will apply, naturally.
2. First Mover Advantage: Late last year, in response to the PTRS consultation process, the Victorian state government moved quickly and committed to paying supplier invoices within 10 days, on contracts under $3 million entered from 1 January 2021. Among the states, Victoria claimed the high ground. Watch out for similar activity, innovation and leverage from first movers across all affected industries and sectors.
The Bottom Line
It is time for B2B suppliers and customers to get online and update their profiles, favoured payment terms and relationship preferences. If you are a <$10m supplier, register through the SBI tool. If you are a $100m+ customer, prepare for a swipe frenzy.
Paul Allen is managing director of Margin Partners and the author of Take Back Your Margin. Email: [email protected]
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