Payment Times Reporting Scheme

The Payment Times Reporting Scheme (PTRS) commenced on 1 January 2021, requiring organisations with an annual income over $100 million to report on the time it takes them to pay small business suppliers. The purpose of this scheme is to increase transparency around the payment terms offered by large businesses to small business suppliers, thereby creating incentives to improve payment times and practices.

The first Payment Times Reporting Register was published on 30 November 2021, and covered the reporting period 1 January 2021 to 30 June 2021. Allowing greater access to this information, enables small businesses to be more discerning as to who they choose to work or trade with, and the range of payment terms offered by larger businesses. 

Analysis of the first reporting period

The Payment Times Reporting Register – available to download via https://register.paymenttimes.gov.au/ – includes information on the payment times performance, as well as the standard payment terms, for 6,000+ entities. The payment times performance of reporting entities is based on both the total number of invoices, and the total value of invoices paid to small business suppliers during the reporting period.

The 6,000+ entities cover a broad range of business types and industries, and have been categorised within the register according to the following industry divisions:

Financial & Insurance Services represented the largest proportion of reporting entities with 18% (1155 total). Education and Training represented the smallest number of reporting entities (17 total).

These industry divisions form the basis for the following analysis.

Proportion of invoices paid within the Standard Payment Terms

Reporting entities are required to indicate the standard payment period on offer for inclusion in the entity’s contracts with small business suppliers. The purpose of this requirement is to give small businesses greater transparency on the standard payment period offered by larger businesses.

An effective, albeit high level, way of interpreting the data contained in the register is to look at the Standard Payment Terms (SPT) offered by an entity at the start of the reporting period, and compare the number of calendar days inputted, to the proportion of small business invoices, actually paid within that number of days. For example, if an entity has reported an SPT of 30 days, ideally, you would expect the largest proportion of invoices to be paid “Within 20 Days” and “Between 21 and 30 Days”.

For completeness, this comparison should include the proportions entered for the total number of invoices, as well as the total value of invoices. Furthermore, where applicable, it would also be recommend to consider the shortest and longest payment terms reported by entities. Please note, approximately 70% of entities reported offering small businesses a shortest and longest payment term. The remaining 30%, in accordance with the regulator’s instructions, re-entered the SPT for the shortest and longest payment terms.

The graph below shows the average SPT at the start of the reporting period for each of the industry divisions. The average SPT is layered on top of the average proportion of small business invoices – by number and by $ value – reported as being paid within the average SPT. For example, large businesses, which fall within the Education & Training division have an average SPT of approximately 32 days. On average 65% of the total number of small business invoices, and 67% of the total value of small business invoices were paid within 32 days across the Education & Training division.

Proportion of invoices paid within each payment time bracket

Reporting entities are required to indicate the proportion of the invoices paid within the following payment time brackets:

• Within 20 Days
• Between 21 and 30 Days
• Between 31 and 60 Days
• Paid Between 61 and 90 Days
• Between 91 and 120 Days
• More Than 120 Days

The graphs below show the average proportion of invoice payments within each of the brackets, based on both the total number of invoices and the total value of invoices, across the various industry divisions.

Proportion of invoices paid within 30 days, and after 30 days

As highlighted by the Payment Times Reporting Regulator at the commencement of the scheme, long payment terms (over 30 days) and late payments are a big problem for Australia’s 3.5 million small businesses. Long and late payment times have negative impacts on small businesses, particularly in regards to cash flow, which limits their ability to hire, invest and grow. It can also lead to higher bankruptcy, exit rates and impacts on the mental health of small business owners. 

The Regulator cited a 2019 study by AlphaBeta, which estimated that long payment times from large business to small business amount to $77 billion per year. They also found that having a 30-day payment time from large business to small business could benefit the Australian economy by approximately $313 million per year.

The graphs below show, for each of the industry divisions, the average proportion of invoices paid within 30 days, and the average proportion of invoices paid after 30 days.

Consequences of non-compliance

In line with the new obligations, if reporting entities fail to adhere with reporting requirements, the court can impose civil penalties, which differ from individuals and body corporates. Reporting entities have been given a 12-month penalty free transition from the date of implementation to familiarise themselves with the scheme and reporting requirements. As of 1 January 2022, civil penalties for various levels of non-compliance become enforceable.

Note: as of 1 July 2020 a penalty unit equals $222

What Grant Thornton offers their clients

Whilst the second report for 1 July 2021 to 31 December 2021 due in March 2022 is penalty free, we want to ensure all reporting entities fully understand their reporting requirements and obligations. The first reporting period saw a range of challenges and uncertainties for our clients, however through our range of offerings that are tailored to support client needs, we were able to make the transition and implementation of the PTR process hassle-free.