By Justine Richardson - CFO Advisory
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Spring is well and truly upon us and after the last several months of living in a challenging environment, spring cleaning sounds like a good idea. The new Payment Times Reporting regulations and the Government’s Budget announcement regarding mandatory adoption of the Peppol electronic invoicing standard for all businesses, should prompt some similar spring-cleaning.
PwC has been working with the government to develop the new Payment Times Reporting Scheme guidance, which will come into effect on 1 January 2021. Large businesses and government enterprises must publicly report on their payment practices to small business suppliers. It is designed to use public and reputational levers to drive behavioural change in what the Government perceives to be a barrier to the flow of working capital to small businesses. Penalties for non-compliance are material (up to $3 million for a business with a turnover of $500 million). While this is principally a compliance requirement, it also presents a huge opportunity for businesses to optimise their Purchase to Pay (P2P) processes.
And the pay off? A future-fit, efficient finance function.
The lowdown and the hidden surprises
There are several things you need to know about the Scheme, one of which is that it applies to more businesses than you might think. Reporting entities include those where annual income exceeds $100 million, or where income is greater than $10 million per annum if the entity is part of a large group. It’s this second part – where entities are part of a larger group – that businesses may be unaware of.
Waiting until the first reporting period is underway is risky. Now is the time to get your house in order.
PwC is also part of the joint Australia/New Zealand Government working group responsible for implementing the Peppol e-invoicing standard. The Government announced in the recent Budget that it is commencing consultation on options for the mandatory adoption of Peppol e-invoicing for all businesses. Government implementation is already mandatory and will occur throughout 2021/22. The effective date and process for mandatory use of Peppol e-invoicing for businesses is subject to consultation. We expect this will be similar to the Single Touch Payroll experience. The upside to e-invoicing is that it can unlock savings of up to 70% in processing costs and can be one of several ways to improve payment processing times. For example, both the Federal Government and the NSW State Government are committing to paying their suppliers who issue e-invoices via the Peppol standard in 5 days. It is for these reasons that many businesses are already adopting Peppol e-invoicing prior to the mandate coming into effect. PwC Australia is also in the process of adopting the Peppol e-invoicing standard.
What’s in it for you?
The Payment Times Reporting Scheme requires compliance, but this doesn’t have to translate to added complexity or cost. PwC is already working with clients to identify relevant systems and data sources to extract the information required to be reported. We will also be providing fully automated end-to-end Payment Times Reporting analysis and filing functionality. This includes an automated small business look up feature, within our existing Financial Process Analyser and Comply First Time tax and regulatory reporting solutions. These will allow you to seamlessly and efficiently extract, validate and report to the Government at the click of a button.
However, it is not necessarily just about getting the numbers out and reported efficiently. Given that your payment practices will be publicly reported, the scheme presents an opportunity to look at your end-to-end payments process and see where there’s potential to uplift your payment processes.
In particular, there’s a chance to:
Of course, complying with any new scheme is not without challenges. When it comes to the Payment Times Reporting regulations, businesses should look out for:
Partner, Sydney, PwC Australia
Tel: +61 422 005 825