Small businesses were paid faster in July than they have been in nearly three years as big Australian companies began honouring a pledge to settle invoices sooner, Xero data shows.

Small suppliers with 30-day payment terms saw their bills settled in an average 34.6 days, down from 36.2 days a month earlier. While that means payments still arrived almost five days late, the trend is improving. July’s figure extends a gradual slide recorded since Xero began following payment times in September 2014.

The July move is notable, as it’s the first month that some large businesses begin implementing a Business Council of Australia pledge to settle small-supplier invoices within 30 days. Some big companies, including Coles and Woolworths, have promised to pay within 14 days. The commitments are not legally binding.

“It’s encouraging to see payment times are dropping,” said Xero Australia Managing Director Trent Innes. “Small businesses employ almost half of Australian workers. If owners are getting paid sooner, that gives them the confidence to hire more people.”

Indeed, more small businesses enjoyed positive cash flow in July than in any month in the past three years. Some 55.3% of businesses had more money coming in the door than going out, based on Xero data. That’s up from 50.7% a month earlier.

Both cash flow and payment times are based on anonymised, aggregated data selected from Xero’s 500,000 Australian subscribers. The metrics are part of Xero Small Business Insights, one of the most comprehensive, real-time pictures of small business conditions available.

While the July small-business data is encouraging, it remains to be seen whether the trend is sustained — and whether it’s enough to satisfy critics of big-business policies.

Voices in Canberra have called for stronger measures than voluntary payment codes. Kate Carnell, head of the Australian Small Business and Family Enterprise Ombudsman, has suggested lawmakers consider mandatory payment times for business-to-business transactions. An April inquiry by her office found small businesses were being used as a form of “cheap finance” by their larger peers, with extended payment terms of 45, 60, 90 and 120 days not uncommon. Nearly half of small businesses had more than $20,000 owing to them in late payments, the inquiry found.

Greens Senator Nick McKim is drafting legislation that would require payment within 30 days to small businesses where a contract is entered into between a business with $10 million or less annual turnover and a big business of $25 million or more annual turnover, or a government agency.

It’s worth noting that historically, payment times tend to shorten in July and remain at roughy that level the following month. Xero Small Business Insights expects to have figures for the month of August in early October. Stay tuned!