Saturday, April 20, 2024

Ombudsman to ‘name and shame’ worst payers

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell has announced a review of payment times for small and medium-sized enterprises (SMEs).

It will “measure the effects of late or extended payment practices on the cashflow of small businesses and family enterprises in Australia”.

The review follows a written request by the Minister for Small and Family Business, Skills and Vocational Education, Michaelia Cash.

‘Worst in the world’

Ombudsman Kate Carnell said: “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.

“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 1,600 businesses identified the biggest cause of business disputes is payments (44 per cent). Either the full amount is not paid (26 per cent) or not paid on time (18 per cent).

“Partial and late payments, seeking discounts to pay in 30 days, offering loans to cover extended terms – all place stress on the cashflow of small businesses. It forces the business to find ways to finance the shortfall in its working capital.”

‘Crippled by slow payments’

To get a better idea of payment practices, ASBFEO has created a five-minute survey for SMEs. The questions are:

  • What payment times are in your contract?
  • Do you have to provide a discount if you want to be paid in 30 days or fewer?
  • Are you paid later than the contract states?

“We’ve also written to large corporations requesting a copy of their payment terms and conditions to suppliers,” Ms Carnell said.

“Extended payment times for suppliers effectively use the businesses in the supply chain as a cheap form of finance. 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 it out of business.

“Poor cashflow is the primary reason for insolvency in Australia.”

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