Who wants to move to NSW and get paid in 5 days?

Payment Terms to Small Business is a hot topic at the moment. If you follow my posts, you will know that I have been writing on this topic for quite a few years now. I hope you are not getting bored with the topic, but I believe that, in this case, the squeaky wheel may be getting some attention.

In 2017, the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell initiated an Inquiry into the extent and effect of long payment terms (up to 120 days in some cases) on Small Business. I wrote about the recommendations from that Inquiry when it was released.

Of course, not all the Inquiry’s recommendations were accepted, but we are inching our way towards at least partial adoption.

 

Payment terms (for some) are inching towards acceptability

In a very pleasing announcement, the New South Wales State Government has announced that it will adopt 20 day payment terms by the end of 2018 for contracts with Small Businesses. The ASBFEO Inquiry recommended 15 day terms, so 20 days is an excellent start.

But wait, there’s more …

The surprising and exciting part of the announcement however, was that the NSW State Government will move to 5 day payment terms for Small Business by December 2109.

What an awesome outcome! From being amongst the worst offenders for paying late to a commitment to 5 day terms. That’s a quantum leap that will no doubt be heartily welcomed by that State’s Small Business owners.

So far, the pattern of regulated payment terms goes like this:

Government adopts self-imposed payment terms > Government mandates that these terms extend throughout their supply chain.

Will others follow?

If anyone reading this is old enough to remember the 1970’s, you will recall when the then Queensland Premier abolished Death Duties in that State. The immediate result was a wave of capital flooding from south to north, as retirees packed up their belongings and money in (mostly) NSW and Victoria, and headed to Queensland. (Of course, the other States followed Queensland’s lead, and the competitive advantage was quickly extinguished).

If the NSW Government follows precedent, and eventually mandates 5 day payment terms for all small suppliers in its supply chain, that would give NSW Small Businesses a considerable competitive advantage.

Big enough perhaps to turn the clock back some 40 years, and attract capital from Queensland and Victoria into New South Wales.

Congratulations to the NSW Parliament for taking the action you have so far to make Small Business viable in your State. Now, if you take the next logical step, I will seriously consider moving my business from Queensland to New South Wales. 5 day payment terms would suit me just fine!

Bronwyn Reid | September 2018

 

 

 

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