Material and supply costs capture headlines. But the rising costs incurred by consultants – especially staff and insurance – remain largely overlooked. One solution is to speed up payment times.  Here’s how.

Nearly a third (31%) of Consult Australia members are concerned about the rising cost of doing business, according to the June 2022 Industry Health Check.

“Increases in material and supply costs seem to be generally accepted by clients as a necessary escalation to service costs. But the rising costs of staffing and professional indemnity insurance incurred by consulting businesses remain largely overlooked,” says Consult Australia’s Senior Policy Advisor, Teone Tobin.  

Consulting businesses may begin to weigh up whether to take on new work if they cannot afford the people resources and professional indemnity insurance to deliver, Teone notes. 

Extended payment times are another “problematic” issue for consulting businesses. 

The introduction of the Payment Times Reporting Act 2020 (Cth) requires large businesses to transparently report on their payment periods. This requirement aims to reduce payment times for small businesses. 

“Our small business members routinely advise us that they are still pressured to accept extensive payment times in contracts and that contract payment times are frequently ignored or inflated due to internal processes by clients. Our members face these challenges from both private and public sector clients.”

 

Members have cited instances where clients have withheld payment of fees until the small business has signed a new contract, even though the work has been completed. 

 

Consult Australia encourages all members to implement efficient payment times in contracts, with 30 days a reasonable maximum period irrespective of whether they are captured by the Act or not. 

More guidance is found in the Consult Australia Contract Suite, a free resource for members that can be used by consultants of various sizes and disciplines across a range of projects.

 

Consult Australia also encourages all clients to adopt the Model Client Policy. “Being a ‘model client’ means working collaboratively with industry on projects to achieve mutually beneficial outcomes,” Teone says.

 

“Model client behaviour, 30-day payment times, together with changes to tendering, contracting and risk allocation can help us to uplift productivity and build a stronger, better industry for everyone.”