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The Council of Small Business Australia (COSBOA) has released a statement calling for the development and implementation of a national prompt payment protocol to ensure small businesses are paid by big businesses within a tighter timeframe.
Cashflow underpins every small business and when payments are not received in a timely manner, said CEO Peter Strong of COSBOA, it is a struggle to pay wages, rent, utilities, suppliers and services.
“Some big businesses will take more than 90 days to pay a substantial debt despite agreed payment terms being 30 days – and this can be the difference between insolvency and a healthy business continuing to operate,” said Strong.
COSBOA said it is time that politicians and big businesses commit to a voluntary code of conduct that sets out prompt payment terms to guarantee a better, more accountable payment culture.
“This issue needs to be fixed once and for all and we believe that one solution is the development and implementation of national prompt payment protocol: a voluntary industry standard where signatories agree to abide by the rules of the protocol and are publicly recognised for doing so,” said Strong.
In the statement, COSBOA draws attention to the big businesses letting down small businesses including major supermarket Woolworths, which pays on 60 days, and the mining giant Rio Tinto, which is proposing to change payments from 45 days to 90 days.
“These companies have such a control of the supply chain into resources and retailing that if they don’t pay on time, then most of their suppliers will also not be able to pay on time,” said Strong.
The protocol would call for businesses to pay within 30 days and would mirror the code already in place in the United Kingdom, which already has 1000 businesses signed up.
A body would be needed to establish and reinforce the ‘Prompt Payment Protocol’, said Strong, and it would only endorse businesses as complying signatories if they pay on time.
“The administrator of the protocol would dis-endorse any business that starts to pay late, which would be an embarrassing and public event. The Prompt Payment Protocol can be a powerful and inexpensive way to increase productivity in the Australian business community and decrease stress on individuals.”
Photo credit: Adam Wyatt, ABC Online