The new Statement has set expectations for the regulator to foster a culture of prompt payment times by increasing the visibility and accessibility of payment times data through potential incentivisation of faster payment times for the benefit of Australia’s 2.6 million small businesses.

It also reinforces the Payment Times Reporting Regulator’s role to support regulated entities, ensuring that they meet and comply with their obligations by providing appropriate guidance, education and practical tools, and adopting a proportionate approach to compliance action.

“One of the biggest issues small businesses raise with me is better payment times,” said Minister for Small Business, Julie Collins MP. “That’s why our Government has worked hard to improve fairness and ensure big businesses are paying small businesses on time.”

Collins added, “Small businesses are the engine room of our economy and it is critical we continue to back them with our reforms to payment times.”

The revised Statement reflects the overhaul of the Payment Times Reporting Scheme which has served as the basis for the Payment Times Reporting Regulator for the various tools such as the Payment Times Reports Register, which assesses big businesses’ payment data to their small business suppliers, thus improving transparency, fostering a fairer business environment and incentivising large businesses to pay faster which will support the growth and sustainability of small businesses nationwide.

The Federal government has also announced that it is investing $33.4 million to implement reforms to improve payment times for small businesses.

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Meant for business-to-business transactions, eInvoicing (or electronic invoicing) lets you exchange invoices digitally through shared software, eliminating the need to print or email them. While it’s still optional right now, it’s set to become the new industry norm.

Over 130,000 Aussie businesses are currently registered for eInvoicing, with adoption growing as more software providers integrate it. The recent Federal budget also allocated $23.3 million to help small businesses adopt eInvoicing.

If you’re feeling a bit overwhelmed by the shift, we shall break it down and show you how this change can be a win for your business.

The right software support

eInvoicing works through standard, secure networks, allowing invoice data to be exchanged between different software systems. In Australia (and many other countries), this standard is the Peppol network. To use eInvoicing, both your business and the recipient’s business must use software that connects via Peppol, where Australian Tax Office-approved service providers securely deliver invoices.

The Australian eInvoicing system is designed to integrate easily with your accounting software. Many small-business providers, like Xero, already offer eInvoicing. So, start by checking if your current system supports it. If not, it might be worth switching to avoid a complicated setup.

When choosing new software, remember to look for:

• Ease of use
• Good integration with your existing systems
• Local customer support

A good invoicing solution will help you stay compliant, streamline your process, and reduce errors.

Slashing scams and late payments

The recent Pursuing Payments Report by GoCardless revealed that one in five Australian business owners are losing between $6,000 and $30,000 each year due to late payments, and more than half expect the problem to get worse this year. eInvoicing automates the invoicing process to facilitate more timely payments.

eInvoicing also reduces the number of late payments and builds better business relationships by encouraging prompt, reliable transactions. It can help to prevent delays and miscommunications, allowing everyone involved to move forward smoothly and avoid any financial hiccups.

eInvoicing’s advanced security features, like encryption and secure transmission, protect your data from scams and unauthorised access. Plus, by storing everything electronically, it cuts the risk of losing or damaging physical invoices and makes it a breeze to manage and find your documents when you need them.

What to do with the money saved

Traditional invoicing often comes with high administrative costs, including expenses for paper, printing, postage, and manual processing time. eInvoicing helps cut or eliminate these costs by automating many of these tasks. With digital invoicing, you can lower your operational expenses, boost efficiency, and allocate resources more effectively. Plus, reducing errors and rework from manual invoicing can lead to even more savings both financially and in human resources. 

With late payments dramatically reduced, your cashflow will also become more secure, giving you more cash on hand to reinvest in your business. According to the Pursuing Payments Report, if customers paid on time, 31 per cent of business leaders would use the extra funds to grow their business, 30 per cent would pay suppliers sooner, and 28 per cent would invest in other areas. This creates growth opportunities even in a sluggish economy, allowing you to explore marketing, new products or services, and even hiring more support.

Switching to eInvoicing is a chance to remove pain points in your invoicing process and boost your business’s efficiency. You’ll not only keep up with the new invoicing standard but also improve relationships, reduce late payments and increase cashflow. 

The post Why (and how) to adopt eInvoicing appeared first on Inside Small Business.

However, the reality is often quite different for small-business owners, and I want to share some lessons I’ve learned the hard way.

You don’t have to scale (or, up yours, capitalism)

I’ve been a company of one and I’ve had up to 18 employees. Today, I have 14 employees, and I’m not planning to increase that number. The memory of having to lay off staff in 2018 due to a health crisis and financial oversight still haunts me. Rushing growth without a solid leadership structure proved costly, and the burden of impacting employees’ livelihoods lingers. Now, I prioritise cautious growth, considering financial implications and the energy required to support a team.

Chasing revenue for the sake of it is also highly overrated.

Screw the vanity metrics of “I made seven figures!”. I want to know profit, mate

Many boast about their seven-, eight- or one-hundred-figure business, but true success lies in profitability, not just income. Profit is what remains after covering all expenses, including taxes, wages, and overheads and you must pull a healthy profit to take on the risk of owning a business.

I also emphasise this point: having a business is risky. Your success, return on investment, and client payment is not guaranteed. Profit is the sign of a healthy business, and in these (still ongoing) uncertain times, you want to deal with a financially stable company that represents a safe pair of hands.

Pay your suppliers within 30 days

Post-GFC times, it came as a massive shock to me that I not only owed a small business, I also owed a bank. A major supplier’s abrupt shift from 30-day to 60-day payment terms left me reeling. No negotiation, no personal contact, no fruit basket – just a cold-form letter. Good times.

Good businesses, both large and small, are going to the wall because their cashflow is rubbish. They can’t get a real human from the accounts department on the line to sort it out as it’s all offshored, and no one is picking up the phone. The construction industry (and others) is rife with this practice of stringing out suppliers, and it needs to stop.

Gather a support crew around you that is fit for purpose

Too late in my business journey, I realised I lacked crucial skills like understanding balance sheets, navigating tough conversations, and crafting meaningful employment contracts. It was embarrassing not to excel at these tasks, as they didn’t come naturally to me.

My talents are limited to design direction, project management, and problem-solving. Anything else, and I’m like a fish out of water. That’s where having a support team is crucial. As a business owner, you wear many hats, but get smart and hire specialists in areas outside your genius zone.

Be a good human

Business is personal. You’re dealing with people, and you have to see the human behind the quote, the project, the design and the contract. Recently, I’ve been giving people the benefit of the doubt. They haven’t called because they’re busy, too. They haven’t signed off on the quote because they must speak to their manager. A little bit of grace goes a long way.

Wherever you are on your business trip, I hope you remember you’re your own best source of wisdom. Trust in your kindness and grit to make good decisions while caring for yourself through the whitewater of business.

The post Five lessons learned from 25 years as a female business owner appeared first on Inside Small Business.

McGrath acknowledged that Australian small-business owners have proved to be a very resilient group of people. “SMEs have been really copping it on all fronts but generally holding up well,” he said. “Over the past 12 months, they’ve had to deal with inflation, and supply chain issues, while interest rate increases have impacted their business lending and home loans.”

McGrath noted that cashflow is a big issue for businesses in 2024 as debtors tend to stretch payment periods beyond the initially agreed terms. As a result, SME business owners and also consumer borrowers are increasingly turning to the non-bank lending industry to make up cashflow shortfalls.

“Debtor payment periods are just one of these storms impacting business at the moment, with debtor payment days blowing out at the big and small ends of town,” McGrath said. “[As a result] 30- to 60-day invoice terms are dragging out to anywhere between 90 and 120 days. That’s a lot of time for SMEs to wait to get their money after delivering goods or services.”

To overcome cashflow issues, McGrath suggesteds that SMEs avail themselves of a finance facility can provide some breathing room for their tightening budgets. He is also advising SMEs using finance to deal with slow invoice payment and high cost of living pressures to strive to get a better deal, instead of simply using it just for cash. In particular, he suggests that SME owners ask suppliers for a discount for quicker payment.

“SMEs are paying their own suppliers in 30-, 60-, or 90-day terms. If you pay cash on delivery or a 14-day term, often a supplier will give business owners a discount of anywhere between three to five per cent of the cost of goods sold. The discount generally far outweighs the cost of finance, so make sure any capital from finance is put to good work,” McGrath concluded.

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Australian small businesses have had it tough in the last few years, and they now face the challenges of stubborn inflation, rising interest rates, tightening consumer budgets and heightened operating costs. Despite these headwinds, this resilient small-business community still has plenty of positive opportunities for growth ahead of it. And taking proactive steps to boost cashflow and fast-track their payments is the first step small businesses can take to set themselves up for such success in the year ahead.

Factors such as high inflation and rising interest rates can have a negative influence on sales volumes and create ongoing cashflow challenges, ultimately impacting financial stability. In fact, recent research from The Council of Small Business Organisations Australia (COSBOA) found that about 43 per cent of small-business owners are failing to make a profit, and that three-quarters of them take home less than the average wage, demonstrating just how tough the current landscape is.

Fortunately, it’s not all doom and gloom for the small-business community. Xero’s recent Small Business Index (XSBI) showed us how resilient Aussie small businesses have been in the face of economic headwinds, with sales growth in the sector in this country outperforming New Zealand, the UK, the US and Canada, despite a slowdown in sales and overall performance. While it’s promising to see the sector weathering the storm, we know this won’t be the case for all – and challenges will likely remain for some time. 

Faster payment times: The key to improving cashflow

Small businesses make up over 97 per cent of all businesses in Australia – they are the lifeblood of our economy. So, how can they manage the chaos of the current economic environment? It all comes down to implementing the digital tools and processes that will support not only their survival, but their success. Two key factors that go hand in hand here are cashflow and payments. By taking simple steps, such as making it as easy as possible for customers to settle their accounts and seeking the support of a trusted adviser, small businesses can free up valuable time that’s better spent future-proofing their business and improving cashflow management.

“Creating more ways for suppliers and customers to pay a small business is a winning strategy.”

Any small-business owner you talk to will attest to the fact that late payments are one of the main contributing factors to cashflow stress. Xero’s latest XSBI data found that small businesses are waiting 23 days to be paid, and that payments are made on average 6.5 days late. This has a huge flow-on effect to wider business operations, impacting everything from productivity to paying wages and investing in future growth. So, where can a solution be found?

Bigger businesses certainly have a key role to play in improving payment times, with recent Payment Times Reporting Scheme data analysis from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) finding that nearly a quarter of larger enterprises take more than 120 days to pay their small-business customers. While there is still a long way to go to implement a change for the better in this area, current action being taken by the federal government is a step in the right direction. The recent independent review of the Payment Times Reporting Scheme recognised that payment times are an ongoing problem for small businesses, and it’s encouraging to see that the government is considering the report’s recommendations. 

In the meantime, we want to empower small-business owners with the tools that will enable them to take proactive steps toward getting paid faster. Adopting online invoice payment options is an effective first step to minimising and counteracting cashflow concerns. eInvoicing, which allows businesses to send and receive invoices directly between accounting systems (eliminating the need for manual, error-prone PDFs sent via email), is more efficient, accurate, and secure than traditional invoicing. Better yet, it makes it easier for customers and suppliers to pay, ultimately facilitating faster payment times and boosting cashflow reserves. 

Creating more ways for suppliers and customers to pay is another winning strategy. By accepting online payments by credit card, debit card or direct debit straight from an invoice, businesses allow customers to pay using their preferred method, increasing the likelihood that they will settle those invoices on time. Adding a click-to-pay or “Pay Now” button to invoices makes this process even quicker and more efficient. 

Beyond payments: Strategies to improve cashflow stress in the new year 

If they’re yet to do so, small businesses should consider engaging a trusted adviser to provide expert guidance on their financial operations. More and more, we’re seeing that advisers are no longer just playing the role of ‘the numbers people’. They now wear multiple hats, having the expertise to tackle large-scale issues and show their clients the way when it comes to innovating, adopting new technology and redesigning their day-to-day processes.

We also strongly encourage small businesses to make the most of government incentives and tax breaks, which can provide a much-needed boost to cash reserves. For example, last year the government announced a new ‘technology investment and skills and training boost’ to allow businesses with an annual turnover of less than $50 million to claim a 120 per cent tax deduction for skills training and digital uptake between 29 March 2022 and 30 June 2023. This is where advisers can also play a key role – ensuring businesses are accessing all of the incentives and initiatives available to them. 

Lastly, small businesses should ensure they are using cloud technology to its full potential. Cloud-based apps and tools can provide businesses with a clearer picture of their cashflow and overall performance, uncovering new avenues for growth, all while simplifying manual processes, enhancing efficiencies and giving business owners more time to concentrate on their business rather than being stuck in the daily grind of being ‘in their business’. Small businesses that are able to take actionable steps to improve their cashflow, encourage faster payment of the invoices they issue, and get their finances in check will give themselves the best chance of starting the year off strong, giving themselves more time to do what counts in 2024.

This article first appeared in issue 43 of the Inside Small Business quarterly magazine

The post Paying attention to getting paid the key to small-business growth appeared first on Inside Small Business.

“It has been a tough year for small and family businesses coping with cost-of-living pressures not just on themselves but their customers,” Ombudsman Bruce Billson said. “We can’t guarantee that every small business will succeed but it is our mission to provide all the help we can for those who want to start, grow or transform a business, and that no business fails because the owners didn’t know about something that might have helped.”

Billson shared that two out of every five requests for help from a small business related to a payment dispute, with being paid on time critical to the viability of most small businesses.

“Cashflow is the oxygen of enterprise but difficult conditions mean when one party is late in paying, it can cascade through the supply chain,” Billson said. “Sadly, too often that first party that is slow to pay its suppliers is a big business or a government department. Power imbalances make it difficult for a small business to pursue timely payment for their services.

“Research by my office shows 43 per cent of small businesses do not make a profit while 75 per cent of self-employed small-business owners working full time earn less than average full-time adult weekly earnings,” Billson added.

The Ombudsman noted that contract disputes ranged from cases where a small business was unaware of auto-renewals for goods and services to terminating agreements.

“Most small businesses in a contract dispute do not want to end the business relationship, they want to keep doing business but they often struggle to fix problems when they arise,” Billson explained. “We can give small businesses the skills – and sometimes case management – to resolve the dispute without ending the business relationship.”

The Ombudsman also noted the sharp rise in the number of disputes involving digital platform providers, pointing out that they have fundamentally changed the way in which small and micro businesses connect and sell to their customers, but that when there is a problem – such as a small business having their account shut down after being hacked – finding a solution can be a nightmare.

“Often there is no real person you can speak to, and the automated systems prevent you being able to escalate the issue,” Billson said. “Hundreds of small business have sought our help in dealing with their digital provider to unlock their accounts so they can get back to doing business.”

In the franchise sector, cases have involved managing disputes about the sale of a business, fees and charges associated with the franchise, helping parties to amicably terminate agreements, and organising Alternative Dispute Resolution when other efforts had failed.

Other disputes pertain to insurance, telecommunications, banking and finance, cyber security and workplace issues such as health and safety, were referred to other relevant dispute resolution agencies because the Ombudsman’s legislation prevents the office from duplicating the functions of other Commonwealth, State or Territory agencies.

“We happily provide a type of triage service to receive the dispute and then assess whether we are best equipped to help or whether the small business will be best served by sending their case, with their permission, to the most appropriate federal or state agency,” Billson concluded.

The post Payment issues make up 40 per cent of small-business disputes appeared first on Inside Small Business.

However, COSBOA also stated that future measures will be required to support small businesses. Achterstraat pointed out that in a tough operating environment, timely payment of small businesses was critical not just for the survival of Australia’s 2.5 million small businesses but also for their suppliers and employees.

“Every time a small business is not paid on time there is a blow to productivity, efficiency and time spent by the owner to chase payment. This hurts the small business itself but also has a flow-on effect to their contractors, suppliers and undermines business investment and growth. There is also increasing evidence that late payments impact the mental health of small-business owners,” he said.

Achterstraat said the government must lead by example in providing more government tenders to small business and paying them on time.

“We welcome efforts that ensure payment times are considered in the development of relevant government policies, including unfair trading practices reforms, eInvoicing and procurement,” Achterstraat said.

According to data from the Payment Times Register, only three out of 10 big businesses pay their small-business customers within 30 days, while nearly one-quarter take more than 120 days to pay up.

It is noteworthy that, despite the findings and the calls of several stakeholders, the Emerson Review did not recommend introducing a compulsory maximum time for small business payment.

“The government made an election commitment to ensure small businesses are paid on time and to ensure a mechanism for payment within 30 days,” Achterstraat commented. “Further work will be required to fulfil this commitment and there is a clear role for the Australian Small Business and Family Enterprise Ombudsman to support better outcomes. We need to maintain a collaborative approach to continuously improve payment times, including promoting that seven- and 14-day payment times are desirable, not just 30 days.”

Achterstraat added that the government may need to consider a further examination of compulsory maximum payment times in the future.

“Just as the government has identified wage theft as a priority issue, non-payment and late payment of small businesses and contractors must receive ongoing focus,” he said. “As the government looks to tighten tax collection from small business and increase the frequency of superannuation payments, it is critical that policy levers that promote cashflow to small businesses are continuously monitored and improved.”

The post COSBOA welcomes Payment Times Register overhaul but “more needs to be done” appeared first on Inside Small Business.

The research found that SMEs are expecting an average of eight invoices to go unpaid between now and Christmas Day, with 23 per cent of them having shared that the pressure of unpaid invoices has been worse than ever this year.

And with Australian businesses generally shutting down over the holiday period into mid-January, this expected lack of cashflow is putting extra pressure on Australian SMEs at a time when cost-of-living pressures are already biting.

Financial strain is already affecting 46 per cent of SMEs due to unpaid invoices ahead of the festive season, with 32 per cent reporting that they are having to use their own personal funds to cover cash shortfalls when paying suppliers, as a result of missing invoices.

“Small businesses are vital to Australia’s economy, contributing over $500 billion to our annual GDP,” Damien Greathead, Accounting and Advisor Group Lead at Intuit QuickBooks, commented. “It’s concerning to hear how exposed our SMEs risk being this holiday season, facing challenges with income and cashflow at such a busy and expensive time of year.”

The report highlighted that chasing invoices and managing business admin is causing undue stress and costs valuable time for SMEs, with 39 per cent spending up to 12 hours a month chasing late invoices. The impacts are keenly felt, with 23 per cent citing they “feel bad chasing people for money”, while 21 per cent felt angry when chasing these unpaid invoices. A further 20 per cent reported feeling additional stress and 19 per cent reported feeling overwhelmed when chasing unpaid invoices. 

The extra pressures SMEs are facing this year risk derailing their plans to rest, recharge, and spend time with family and friends this holiday season. A total of 67 per cent of SMEs are already admitting to sacrificing precious personal time to get on top of business admin, be that evenings during the week (67 per cent) or while kids are at after-school or weekend extracurricular activities (25 per cent). Meanwhile, those having to multitask admit managing admin on the go can be a struggle, with the majority of SMEs feeling this way (76 per cent).

“It’s an overwhelming predicament which SMEs currently find themselves in – time poor, trying to keep on top of admin while running a business and getting paid on time to keep on top of bills,” Greathead said. “Our advice to small businesses is, you don’t have to go it alone – a financial advisor coupled with reliable and intuitive accounting software – can make a big difference in alleviating stress and keeping on top of business admin including invoicing and getting paid.”

Of the businesses surveyed, 29 per cent only engage an accountant or bookkeeper to assist with tax time, not for support throughout the year. Some of the reported benefits of having an accountant or bookkeeper managing their business throughout the year included time-saving (34 per cent) and reduction in financial stress (30 per cent).

The post Unpaid invoices expected to cost Aussie SMEs $22 billion this year appeared first on Inside Small Business.

The review called for an overhaul of the Payment Times Reporting Act alongside recommendations to make the data more useful for small business.

The Australian Small Business and Family Enterprise Ombudsman Bruce Billson expressed his wholehearted support to the review’s findings saying, “Finance is the oxygen of enterprise. Cashflow is vital to the survival of small and family businesses, yet this sobering review by Dr Craig Emerson finds there has been no significant improvement by big business to pay their small business customers in a timely way.

“The original intention of the Payment Times Register was to improve the performance of big business but it has so far failed,” Billson added. “Dr Emerson has produced a thoughtful road map to get this ambition back on track.

“Almost 40 per cent of the requests for assistance to our office relate to payment times and payment disputes and as Dr Emerson has noted, late payments are a major source of financial and emotional stress for small-business owners and have flow-on consequences throughout the economy,” Billson continued.

The report noted that there was “no empirical evidence of a significant improvement in the payment terms and times of large businesses in respect of their small-business suppliers”.

It also stated that “large businesses that do not pay their small-business suppliers quickly are using their market power to obtain a cashflow advantage over small-business suppliers, regarding them as a cheap source of finance”.

The Ombudsman noted that the review’s key finding aligns with its long-held assertion that the performance of many big businesses in paying small businesses has been woeful.

“Dr Emerson’s call for an overhaul of the ‘poorly functioning’ and ‘almost useless’ Register constrained by the legal design, aligns with our recommendation to the inquiry for the Register to provide meaningful information,” Billson said.

“We agree with Dr Emerson the Register has ‘untapped potential’ that can be realised through the reforms he has suggested to deliver more accessible, accurate and useful information that will give big business an incentive to lift its game,” he added.

The review recommended that the slowest payers be “named and shamed”, while the fastest payers would be “named and praised”. “Publicising the worst and best payers uses both reputational sanction and reward to influence the payment practices of businesses, since the reputation of a business matters,” the report explained.

“We are ideally placed to bring into operation a ‘name, proclaim and shame’ scheme that drives better payment performance in support of a more effective and reformed Register,” Billson said. “Celebrating those big businesses that do the right thing will recognise their timely payment performance and put pressure on those with poor payment records. There are still too many big businesses who make small businesses wait an astounding 120 days or more to be paid.”

The Ombudsman noted that a similar system operates in the UK and has been highly effective and has made paying small-business suppliers quickly part of positive corporate reputations and the environmental, social and governance (ESG) obligations of large businesses.

Billson also expressed support for the other recommendations in the review to better protect the rights of small businesses regarding unfair trading practices and unfair contract terms, facilitating the inclusion of a dedicated small business channel into the Australian Government’s proposed Designated Complaints function and increasing the adoption of eInvoicing.

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This is in line with data from the Australian Bureau of Statistics which listed uncertainty about economic conditions, supply chain issues, cost of materials, and lack of access to additional funds as some of the factors hampering general business activity among businesses.

It is also reported that delayed payments are impacting cashflow for small businesses at a higher rate than larger businesses. SMEs who are generally accepting of already lengthy 90 and 120-day payment terms are now waiting even longer if invoice payments are delayed.

“These conditions are strangling SMEs,” Moneytech CEO, Nick McGrath, said.  “Our internal research shows SME customers chasing invoice payments to maintain cashflow as their main business concern prior to seeking finance products.”

MoneyTech suggests that in order to combat slow invoice payment and improve cashflow, SMEs can tighten their own internal processes and also seek external assistance to ensure their business activity is not negatively impacted in FY23-24. 15 per cent of businesses have reportedly sought debt or equity finance and debtor finance to alleviate SME cashflow issues.

“If a business’s cash is tied up in outstanding invoices, debtor finance helps free up cash by supplying up to 100 per cent of invoices as soon as they are raised, instead of waiting 90 or 120 days, or more, for payment,” McGrath said. “Debtor finance can be used for better cashflow management, realising the full value of customer invoices, paying salaries, paying suppliers, and investing in growth opportunities.”

For businesses facing slow invoice payments, McGrath shared some tips for businesses owners to consider for effective planning around the new financial year and identifying any potential cashflow hurdles.

Assess finance – “By outsourcing an independent accountant to do an in-depth analysis of the business’ finance, business owners can gain a fresh perspective of their finances. Using a strategic budget can also help predict the financial implications for the upcoming year and may identify new opportunities for business growth. The budget should include financial forecasts including profit and loss, balance sheet and cashflow statements.”

Reassess strategic plan – “Reviewing the business’ short-term and long-term goals can help evaluate the current strategy in place and ensure they are aligned. Undertaking a situational and SWOT analysis can be of use, especially if you leverage customer’s feedback as a starting point for developing solutions to meet customer feedback. The key is to keep any plan flexible so your business can adapt to any changes in the environment and make the most of potential opportunities.”

Utilise a sustainable cashflow option – “SMEs struggling with cashflow, should consider both immediate and long-term support.”

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