Wow, thanks for highlighting this. I knew that overdue payments were a big problem for SMEs, but wasn't aware of talk to legislate a solution.

Personally, I don't think that legislation is the best answer. The reality is that it takes a long time to get new legislation enacted, along with all the supporting rules, regulations, forms and infrastructure.

Also, we already have processes in place to recover overdue debts. They very form state to state, and can be more or less time consuming depending on where you are, the amount involved and the path you choose to take.

Instead, why not invest resources into educating the SME sector on how to avoid bad debt in the first place, how to collect debts, and where to go for help and support. Instead of developing new laws, why not develop new, better, more accessible resources for business owners to help them reduce debt burden, connect them with debt collection agencies that can recover overdue payments for them, or even set up subsidies so that the SME doesn't carry all the financial burden of recovering bad debt.

I agree that more can and should be done, but I am not convinced that more legislation is the right solution.

Bec

I have to say I'm not a fan of legislating for good behaviour, especially not as it relates to business to business commerce. Besides that that I don't understand how a law like that could ever be enforceable.

I think the biggest problem is with small business itself. Small business owners simply do not take the time to develop, implement and consistently apply realistic payment terms and collection systems.

I have found that when thinking properly about how to set up your payment terms, how to ensure that clients understand them and how to ensure that payments are collected as per the terms, that 75% of the problem of overdue payments goes away. The final 25% never goes away and as a small business owner you must simply resolve to stop doing business with customers who don't pay on time.... Life's too short.

A well thought out collections system that's applied and run like a well-oiled machine... relentlessly, and that includes as a final automatic step sending the bill off to a collections agent, whose fees are added to the outstanding debt, automatically, sends a message to recalcitrant payers that they m,ight as well pay up, because it's only going to cost them more money in the end and most recalcitrant payers are not of bad faith, but they simply have their own cash flow challenges and they pay the squeaky wheel first

Interestingly, the construction industry in Victoria (and I believe mirrored in many other states) has a form of this called the Building and Construction Industry Security of Payment Act 2002 (VIC) - it is based on the premise that construction contractors already 'cashflow' projects for their clients by expending resources before receiving payment, so it sets a clear set of timeframes for payment or part payment. Failure to pay in accordance with this Act is easily enforceable at the Victorian Civil and Administrative Tribunal or the Magistrate's Court, on the basis that the legislative timelines are very clear and strict.

A core tenet of this Act is 'pay now, argue later' - that is, a client can issue a 'payment schedule' outlining a different (reduced) amount or alternative payment terms but that at least provides protection to the contractor for the agreed amount, rather than putting the whole invoice on hold. If a client doesn't lodge a payment schedule, they are deemed to have accepted the invoice and it becomes very quickly enforceable.

More info at:

http://www.austlii.edu.au/au/legis/vic/consol_act/...

http://www.constructionlawmadeeasy.com/SecurityofP...

http://www.vba.vic.gov.au/practitioners/security-o...