The Payment Times Reporting Scheme was introduced in January 2020 and requires large businesses and some government enterprises with an annual taxable income of more than $100m to publicly report on their payment terms and times for their small business suppliers.
To date there have been over 35,000 reports submitted to the Payment Times Reporting Regulator.
Provided below are a number of KPMG observations surrounding the Payment Times Reporting Scheme in anticipation of the next submission period.
What is the purpose of the Payment Times Reporting Scheme?
The Payment Times Reporting Scheme does not mandate that small businesses be paid within a certain period, rather it aims to promote transparency over large businesses’ payment practices and encourages timely payment to small business suppliers.
The publicly available Payment Times Reporting register contains information relevant to the Scheme for all reporting entities and includes, among other things, the reporting entity’s payment terms; its aggregated payment performance against pre-set benchmarks; as well as use of supply chain financing.
The perceived benefits of the public register are:
- small businesses will be able to make a more informed decision about their potential customers;
- public transparency on payment practices is also expected to incentivise large businesses to pay their small businesses on time; and
- over time, it will improve payment times as large businesses move to best practice standards.
The hefty penalties that can be imposed on contravention of the Scheme, together with the Regulator’s ability to publicly ‘name and shame’ non-compliant reporting entities, highlight both the financial and reputational risks associated with the Payment Times Reporting Scheme.
How do I determine whether I need to report?
The scope of the ‘reporting entity’ definition warrants close analysis given it is those entities that are required to lodge bi-annual reports to the Payment Times Reporting Regulator.
A constitutionally covered entity becomes a reporting entity if it is not a registered charity with the Australian Charities and Not-for-profits Commission, carries on an enterprise in Australia, and for its most recent income year:
- Its total income exceeds $100 million; or
- If the entity is a controlling corporation and the combined total income for its group exceeds $100 million; or
- If the entity’s total income exceeds $10 million and is a member of the controlling corporation’s group whose combined group income exceeds $100 million; or
- If the entity is a trust and a controlling corporation and its total income exceeds $100 million.
Immediate actions to consider
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We recommend businesses begin preparing for their submissions as early as possible to ensure there is ample time to seek the appropriate sign offs from key stakeholders.
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With the Regulator’s ability to audit submissions, it is important to ensure that the necessary workpapers are retained in the event of a Payment Times Reporting Regulator audit.
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Recent updates to guidance material will likely impact organisations with even the most robust Payment Times Reporting processes. Therefore, it is important to be aware of the latest changes to the guidance and ensure your process appropriately reflects these changes.
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Large, complex groups often contend with multiple ERP systems. Reporting entities will need to consider how they will feed their data into standardised fields for the purposes of preparing their Payment Times Reporting submission.
Navigate your Payment Times Reporting journey with KPMG
KPMG’s Payment Times Reporting solutions range from targeted advice through to a fully outsourced metrics calculation service. To understand the latest developments and how KPMG can support your reporting needs, contact us today.
