FAQs Australian Supplier Payment Code
Why do we need the Australian Supplier Payment Code?
Trade between small, medium and large businesses is valued around $555 billion per year, so the whole country benefits when we work together more productively.
We know paying business suppliers promptly and on time is critical to supporting healthy cash flows and working capital, and ultimately supports a business’s viability and ability to expand.
Although average payment times have fallen across the economy, many small businesses still report that they are facing unsatisfactory delays in payment of up to 120 days or more.
The Code addresses this concern by requiring signatories to pay small business suppliers within 30 days of a receipt of a correct invoice, along with a number of other complementary commitments.
Does the Code have legal force?
The Code is a voluntary commitment and relies on self-enforcement by the signatory to the Code. It is not a prescribed Code and is therefore not enforceable by the ACCC.
The Code does require signatories to establish a process for resolving disputes and complaints with their suppliers. It also requires signatories to publish, in an easily accessible location, the policies and practices the company has in place to comply with the Code.
How can I find out if a company has signed up to the Code?
Organisations that sign up to the Code are recognised on the Australian Supplier Payment Code website - www.supplierpaymentcode.org.au.
Why is a voluntary approach preferred to regulation?
A voluntary, industry-led effort to change payment practices can achieve better outcomes while limiting the cost to businesses, customers and taxpayers.
By contrast, a regulatory approach would impose new administration and compliance costs, adding to Australia’s already high existing stock of regulation and the growing cumulative regulatory burden on business that diverts from productive activity.
To achieve lasting improvement in payment times we need a culture of cooperation, not compliance, and this is best served by companies working together rather than further government intervention.
What role can governments play?
The Business Council is encouraging the federal government and all state and territory governments to promote the Code across Australia, including requiring their own agencies to sign on.
The Business Council worked with the Victorian Government during the development of the Code to adopt a single, voluntary and national approach. We look forward to continuing to work with all of Australia’s governments to improve payment practices across the economy into the future.
Is the 30 day commitment allowed to be varied?
Signatories to the Code are, first and foremost, committing to pay small business suppliers within 30 days of receipt of a correct invoice. Payment terms such as ‘30 days from the end of the month of receipt of invoice’ or ‘payment within a 45 day period’ are not consistent with this commitment.
The Code allows some payment time flexibility for ‘mutually agreed terms’ and ‘standard industry practice’, but only in exceptional circumstances.
Why do signatories have up to eighteen months to comply with the Code?
Some businesses will require up to 18 months to assess current payment practices and make changes to their payment systems and payment policies. This recognises that the change might require capital investment and careful management, which can take time to implement properly.
Although 18 months is the upper limit, many signatories will take a lot less time to comply with the Code. Some signatories already have payment policies and practices in place that comply with the Code.
How is a small business defined?
There is no generally agreed definition of a small business - governments themselves apply multiple definitions. So the code is designed to allow signatories to choose from one of three commonly used definitions:
- a company with turnover below $10 million, or
- a company with fewer than 20 employees, or
- companies that supply up to a maximum amount of goods and services each year.
The definition(s) of a small business adopted by the signatory company must be consistently applied to all small business suppliers.
The definition of small business that is used by signatories must be published and easily accessible.
Signatory companies commit to apply the code to small business suppliers where it is able to verify their eligibility as a small business. Exceptions may be applied for supplier businesses that are part of a consolidated group of companies.
The Business Council supports the establishment of a small business register, as recommended by the Australian Small Business and Family Enterprise Ombudsman. A register will make it easier for signatories to verify the small business status of suppliers, for example, by reference to their ABN.
What qualifies as ‘industry standard practice’?
The Code allows for an industry standard to apply where there are exceptional circumstances, as occurs in the construction sector. An industry standard is a common practice that is adopted by all participants in an industry.
Signatories should point to evidence to justify the use of the standard industry practice when they publish their payment policies under the Code.
Transparency is critical. Anyone should be able to easily see how each signatory is delivering on its commitments under the Code and be able to subject those commitments to scrutiny.
What are the reporting requirements under Code?
Signatories are obliged to publish, in plain English, the policies and practices they have in place to meet their commitments under the Code.
This added transparency ensures small businesses and other stakeholders can easily find information about how companies will meet their commitments and what policies and practices are in place to benefit them. It helps to make signatories publicly accountable for meeting their commitments under the Code.
The publication of policies and practices should be in an easily accessible location, usually on the signatory’s website.
The Code does not require signatories to report on payment performance. However, companies are free to provide any additional information over and above the commitments in the Code, and this may include reporting on their payments performance if they wish to do so.
What happens if there is a dispute under the Code?
Each signatory is required to put in place clear, fair and efficient processes for dealing with complaints and disputes about payment times and practices. These processes should be used to resolve complaints and disputes in the first instance.
The Code does not address the situation of an ongoing dispute that cannot be resolved and so the parties remain free to exercise other options for dispute resolution. If there is an ongoing dispute then the supplier should consider contacting their local small business commissioner.
How will the performance of the Code be assessed?
Performance audits of the Code will occur at the end of each financial year. The purpose of the audit is to assess the success of the Code in terms of its take-up and implementation by industry and its impacts on payment times for small businesses.
Individual companies may be asked to voluntarily provide information to help inform the performance audit but will not be audited themselves as part of this process. Small business suppliers will be consulted during the audit process.
Will companies have their individual payment performance audited under the code?
The Code is a voluntary undertaking by signatories and is completely self-enforcing.
The requirement to publish company policies and practices in place to comply with the Code means companies can be held publicly accountable for the commitments they make.
If a company is continually violating its commitments under the Code then, for the sake of the integrity of the Code, the company may be asked to take further steps to comply, or withdraw as a signatory.