Legislation to resolve payment times a step closer

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell, has warned that if big businesses continue to ignore the calls to pay their small-business suppliers within 30 days, she will have no choice but to recommend federal legislation to enforce the measure.

“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,” Carnell said. “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.”

The Ombudsman noted that late payments by large businesses to small businesses account for 53 per cent of all invoices. That means $115 billion paid late to small businesses – equivalent to $7 billion of working capital to Australian small businesses every year.

“The economic case for faster payment times is clear, not just in Australia but internationally,” Carnell said. “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 $6 billion 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.”

Carnell, whose final report on the Supply Chain Finance Review will be handed down at the end of March, lamented the fact that the voluntary Supplier Payment Code just isn’t working.

“The Code is voluntary, there is no compliance monitoring and it’s actually unenforceable,” Carnell explained. “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.”

Angus Capel, Small Business Advocate at Xero Australia, welcomed the ASBFEO’s position.

“We would welcome any legislation to ensure small businesses are paid within a 30-day period. We agree with the Ombudsman the economic case for legislating faster payment times is strong. For too long, small businesses have carried the burden of big businesses not being able to pay invoices on time,” Capel said. “The arrival of e-invoicing in Australia this year means we now have the technology solution to deliver faster payment times from big business to small business.”

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