Legislate 30-day payment times: Ombudsman

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The Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell, is calling for legislation requiring small businesses to be paid within 30 days, targeting big businesses which seek to delay payment.

Pay small businesses on time: Kate Carnell
Pay small businesses on time: Kate Carnell

Print businesses are among those that suffer with delayed payments, with big business stringing out payments to their smaller suppliers. Household names Myer, David Jones, Just Group, Sussan Group, and Carlton United Brewery are called out by Carnell as among those "having payment policies that are damaging to their small business suppliers”.

The requirement for maxiumum 30 day payment is a key recommendation made in the ASBFEO’s final report regarding its Supply Chain Financing Review, which reflects a recent surge in larger businesses pushing out payment times to their small-business suppliers.

Carnell said large business that extend, and in some cases suspend, payments to small businesses are on notice that this behaviour is unacceptable.

“There’s no denying businesses of all shapes and sizes are enduring extraordinary challenges as a result of the Coronavirus crisis, but small businesses are being hit hardest,” Carnell said.

“Many small businesses have been forced to close their doors and a lot may not survive the coming months, even with significant support from the government. That’s why it is more important than ever to ensure small businesses are paid on time.”

Andrew Macauley, Print and Visual Communication Association CEO, said the association is fully backing the move. He said, "It’s something we’re 100 per cent in support of. Our concern is we’re seeing that payments are delayed and deferred in these times.

"Small businesses are already dealing with diminished cash flow, and we're starting to get reports of delayed payments to SMEs. This double whammy of diminished cashflow, with deferred payments, could be disastrous.

“If the government is putting guidelines and rules in place, it needs to act immediately; this is a serious issue.”

Carnell said when a small business gets paid on time, the whole economy benefits, but a lack of cash flow is the leading cause of insolvency.

“Legislation requiring SMEs to be paid in 30 days is the only way to drive meaningful cultural change in business payment performance across the economy,” Carnell said.

“If Australia were to go down this path, it would not be alone. Just recently, legislation was tabled in the UK that stipulates a uniform 30-day statutory limit for payment of invoices and provides for enforcement of financial penalties for late payments.

The Supply Chain Financing Review calls out several household-name businesses that have engaged in poor payment practices.

“Our review has revealed the voluntary Supplier Payment Code is not effective. There is no compliance monitoring and it is actually unenforceable. This is consistent with similar systems internationally.”

Carnell said that while she supports the Payment Times Reporting Framework as a useful tool, it is unlikely to result in the systemic change that is needed.

“When used appropriately, supply-chain finance is a legitimate and effective product that can be used to free-up cash flow for small and family businesses. In fact, it may be particularly useful to small businesses that need to be paid faster as they navigate their way through the Covid-19 crisis,” Carnell said.

“However, it is critical that harm inflicted on small businesses as a result of misuse of these products be urgently addressed.”

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