The Australian Small Business and Family Enterprise Ombudsman Kate Carnell has announced a review of payment times.
Ms Carnell has put big business on notice over the impacts of late or extended payments, beyond the 30 day global standard, to the cash flow of small businesses and family enterprises.
“In our 2017 Payment Times and Practices Inquiry, we found Australian payment times were the worst in the world, with invoices paid on average 26.4 days late,” Ms Carnell said.
“We identified a growing trend for large Australian and multinational companies to delay and extend payments from 30 days to 45, 60, 90 or 120 days.
“More recent research involving 1600 businesses identified the biggest cause of business disputes is payments (44 per cent), with either the full amount not being paid (26pc) or not being paid on time (18pc).
“Partial and late payments, seeking discounts to pay in 30 days, offering loans to cover extended terms, all place stress on the cash flow of small businesses. It forces the business to find ways to finance the short fall in their working capital.”
Ms Carnell is sick of big businesses feathering their own nest by holding up payments to smaller companies.
“These companies pay slowly because they can, little businesses have no choice but to deal with them,” Ms Carnell said.
“In Australia we tend to have a fairly solid concentration of big business, like supermarkets, transport companies and so on.
“Really, they’re using little businesses as their bank.”
One of Ms Carnell’s chief concerns is the impact of late payments on rural and regional businesses.
We found Australian payment times were the worst in the world, with invoices paid on average 26.4 days late
- Kate Carnell
“The impact on rural business is significant. Often their businesses’ are mums and dads, family businesses. And they have to make their payments to staff weekly or fortnightly, their landlords, suppliers and the Tax Office.”
Ms Carnell said she had also written to large corporations requesting a copy of their payment terms and conditions to suppliers.
“Extended payment times for suppliers effectively uses the businesses in the supply chain as a cheap form of finance,” she said.
“Too many small and family businesses are being crippled by slow payments and the national economy suffers as a result.
“When a business experiencing extended payment times is also hit with late payments, it stresses the business further, which can easily put them out of business. Poor cash flow is the primary reason for insolvency in Australia.”
The Ombudsman kicked off its survey after a request by the Minister for Small and Family Business Michaelia Cash, who requested advice on the impact these payment practices were are having on small and family businesses.
In a sure sign that an approaching federal election has put a rocket under the government, the Ombudsman is set to report in the next week, with a response from the Minister expected by the end of the year.
The Ombudsman is circulating a five minute survey for small and family businesses to get a better idea of the state-of-play on payment times and practices in Australia.
Ms Carnell said the survey was quick and straightforward: what payment times are in your contract?; do you have to provide a discount if you want to be paid in 30 days or less?; are you paid later than the contract states?
Visit: www.asbfeo.gov.au