The Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell, says if big businesses continue to flout reasonable payment terms, she will have no choice but to recommend federal legislation requiring all businesses to be paid in 30 days.
“In the past week, Telstra and Rio Tinto have moved to 20-day payment terms for SMEs and there is no reason why other big businesses can’t do the same,” said Carnell. “Australia’s big businesses have had more than enough chances to do the right thing, so if they can’t follow Telstra and Rio’s lead, I will have no choice but to recommend legislation requiring 30 day payment terms across the board.”
Late payments by large businesses to small businesses account for 53% of all invoices in Australia. That works out as A$115bn paid late to small businesses – equivalent to A$7bn billion of working capital to Australian small businesses every year, according to Xero.
“The economic case for faster payment times is clear, not just in Australia but internationally,” Carnell added. “When the Obama administration moved to 15 day payment times, a Harvard Business School study found that created 75,000 jobs and delivered an additional US$6bn to US workers’ pay packets. Our recently released position paper outlines the key preliminary findings of our Supply Chain Financing Review and we are seeking feedback on that before making formal recommendations.”
The final report will be handed down at the end of March. Carnell noted that so far the Supply Chain Finance Review has revealed the voluntary Supplier Payment Code is not working.
“The Code is voluntary, there is no compliance monitoring and it’s actually unenforceable,” said Carnell. “The fact is that all businesses, regardless of their size should be paid in 30 days and supply chain finance should be available to those small businesses that want to be paid faster.”
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