Folder with bar graphs and pie charts and person with pen in hand working on the page.

Payment times reporting scheme

Are you a large business with a turnover of >$100 then you may need to be ready for the first Payment Times Reporting Scheme (PTRS) report which is due for lodgement on 30 September 2021.

The Australian Government appointed the Payment Times Reporting Regulator on 1 January 2021, with the PTRS brought in to help create faster and fairer payment times for Australia’s 3.5 million small businesses.

What is the Payment Times Reporting Scheme?

PTRS is new legislation that requires larger businesses with a turnover >$100 million to report on their supplier’s payment practices related to small business suppliers with <$10 million turnover.

When is PTRS effective?

Reporting is six monthly within 3 months of half year end. For example, if you have a 30 June year end, your first reporting period is 1 January 2021 – 30 June 2021 and the reporting is due by 30 September 2021.

Why was PTRS legislated?

PTRS was introduced as there is estimated to be $77 billion worth of payments made to businesses later than 30 days, with 63 days until payment being the average in 2019.

What businesses are required to report?

According to The Treasury, The PTRS applies to businesses that:

Are constitutionally covered entities;
Carry on an enterprise in Australia; and
Have a total income of more than $100 million

Read more about the eligibility criteria here.

How do businesses submit a report?

Businesses that meet the reporting requirement can register in the Payment Times Reporting Portal. Information on reporting templates, completing a report, submitting a report, and so on can be found within the portal.

How will PTRS improve payment performance?

The risk of reputable impact from public disclosure is expected to drive better payment behaviours in large businesses. Plus, the transparency will help small businesses to make more informed choices when deciding who to do business with.

How to identify small businesses to report to?

The Small Business Identification (SBI) tool can be used for large businesses to identify small business suppliers. The SBI tool is simple to use, with the reporting entity being able to upload a CSV file with all current supplier ABNs. The SBI tool will spit out a new CSV file listing ABNs which are small business suppliers that should be reported to under the PTRS.

What are the impacts of the Payment Times Reporting Scheme?

Change in reporting requirements

Increase in external reporting obligations, which may require change to existing processes and procedures.

Transparency

Increased transparency may change the way suppliers engage with the business.

Reputable impact

Poor payment performance will be reported publicly, potentially resulting in reputational damage that may impact supplier relationships. There is also upside of being a good payer.

Business impact

Adjustments to payment terms/timing may shorten the working capital cycle. This may require a change in funding and/or the way debtors and inventory are managed to help ‘rebalance’ the cycle.

Regulatory intervention

Poor performers are at greater risk of regulatory intervention, including audits by the regulator where there are issues with reporting.

Financial penalties

Failure to comply with the regulation may result in financial penalties.

How can your business prepare for PTRS?

According to McGrathNicol Advisory, the following is how businesses can prepare for PTRS.

Review and verify suppliers you will need to report on
Review availability and quality of information that will be required to be reported to the Regulator
Review and stratify supplier payment terms and average timeliness of payments to understand if there are any material issues to resolve prior to the first report
Assess the potential working capital, cash flow and funding impacts that changes in payment terms / behaviours may create
Develop and implement a robust plan to offset the impact through other working capital ‘levers’ that can best optimise your working capital position
Review the procedural framework, governance and controls related to procurement, accounts payable, supplier management and reporting, and reset any policies and processes as necessary

If this blog has sparked any questions and you’re not sure where to start when it comes to the new Payment Times Reporting Scheme, speak to your Ledge Finance Executive today. We have a referral network with a number of advisory firms who we can put you in touch with to help organise relevant information required to report and to understand the impact of any changes to your working capital cycle. Call our offices on (08) 6318 2777 or email secure@ledge.com.au and we will be in touch.

Sources:
McGrathNicol Advisory | Payment Times Reporting Scheme
Treasury.gov.au | Payment Times Reporting Scheme
Australian Government: Department of Industry, Science, Energy and Resources | Payment Times Reporting Scheme

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Please note the information provided on this page is general in nature and does not constitute financial, taxation or other professional advice. You should consider whether the information is appropriate for your needs and seek professional advice prior to making any decisions.