Australia Names & Shames Government’s Late Payments

Government procurement programs can lead the charge to more efficient procurement practices from the public sector to the private one. News from South Australia, however, unveils that the nation’s government procurement practices aren’t quite exemplary, as showcased by a recent name-and-shame campaign by the treasury.

Last week The Advertiser reported that government agencies in the nation owe more than $75 million in late payments to small suppliers and contractors. In an announcement on its website, the Department of Treasury and Finance listed the worst offenders in the government — a first for the treasury, said reports.

According to officials, SA Health ranked dead last in paying its small suppliers on time, with 129,662 invoices extending beyond 30 days past due, leading to $19.6 million in late payments between 2013 and 2014. The treasury reported an additional 57,388 bills stuck in SA Health’s accounts payable department went on to be more than 60 days past due.

The Housing Trust, Transport, Education Department and SA Water were also among the worst offenders, according to the stats.

The treasury’s announcement provided the newest information on government payments to small suppliers since the nation implemented legislation in 2013 to help curb unsettled invoices by allowing small suppliers to charge interest when their bills go unsettled. And despite millions in outstanding invoices, the treasury noted that the majority of bills were paid within one month of invoice receipt.

“There has been a significant improvement in the time it takes for government agencies to pay their bills,” the treasury said in a statement, according to reports. In addition to an e-invoicing system implementation, the treasury said the name-and-shame tactic — allowed by the 2013 Late Payment of Government Debts Act – has been particularly effective in assuring small government suppliers get paid on time.

But according to reports, some experts say that the new late payments legislation hasn’t done enough to curb the issue.

Nigel McBride, who heads the South Australian Employers’ Chamber of Commerce and Industry (or Business SA for short), told The Advertiser that government suppliers have largely failed to take advantage of the new legislation that allows them to tack on a 5 percent interest rate every day a late invoice goes unpaid. Government departments, he said, should automatically add this interest to the bills, instead of making small businesses ask for it.

“The onus should be on the public sector agency to automatically add the interest,” McBride said. “When these purchasing agencies are so dominant in terms of scale and impact, it would take a brave creditor indeed to raise the penalty-interest issue.”

According to McBride, government buyers can be just as dominant as private corporate procurers in dictating payment terms with small suppliers. “There is clearly an element of fear present,” he said, “which is reflected in the data that no creditor has charged interest despite a very large volume in late payments.”

“In addition,” he said, “not all small businesses have the time and resources to monitor interest liabilities.”

Last week, reports pointed to a weakening Australian dollar, slowing economic growth and slashed exports — especially to China — as all harming Australia’s position in the global market. The latest data by the Australian Bureau of Statistics found weakening investment in businesses. “Business investments are closely related to GDP growth,” reported The Daily Reckoning, noting a 10.5 percent decline in capital expenditures compared with the same time last year. “Any downturn in investments signals poor business conditions. If businesses aren’t spending, then the economy struggles to grow.”

McBride stressed that, with 98 percent of South Australia’s businesses being small and medium-sized enterprises, it is imperative that government buyers support their own economies by paying those suppliers on time. “The law should apply to all businesses,” he stated. “In these challenging times, cash flow is vital for all businesses of any size.”