Payment times are still a problem for SMBs according to the Small Business Ombudsman, Kate Carnell.
Speaking at the Vodafone National Small Business Summit in Sydney today, Carnell says when she went on her first listening trip around Australia, payment times was the most consistent issue for small businesses around the nation.
“We did an inquiry and we found payment times in Australia are amongst the worst in the OECD,” Carnell says.
Listening to small business owners’ concerns, Carnell launched an inquiry into payment times for small business and many of the report’s recommendations have been taken onboard, with the government resolving to now make payments on contracts up to $1million within 20 days. However, other industries and big corporations continue to lag behind. The result for many small business owners is a cash flow problem that can place many on the brink of insolvency.
Whilst Carnell says some of the larger corporations such as Telstra and Mars have come onboard signing up to 30-day payment terms for their suppliers, there is still much to be done to solve the problem.
The Business Council of Australia has suggested a voluntary supplier payer code to ensure corporations make payments in a timely fashion. However, the code is voluntary and doesn’t require companies to report.
The code has 80 signatories, yet Carnell believes reporting is essential for any significant changes in payment patterns to occur. The ombudsman has set up a national Payment Transparency Register and she hopes one-day supplier payments will be regulated.
“We hate red tape and more government laws but the EU and UK have laws in this space and they have had to regulate. As big multinationals have told us, if there is no regulations, the decisions will be made in Switzerland and the US (Nestle is one of the offenders with 90 day payment times).
“Just last week Xero released their insight figures which show payment times have been their worst in the last few months and only 51 per cent of businesses are cash flow positive,” adds Carnell.
“We’ve done the stats we’ve done the work – but still payment times are too slow and there are indications it’s getting worse.”
Carnell suggests it’s vital to keep the pressure up if there are to be any changes.
“You hear ‘oh well, the average payment time is only 11 days late” – but 11 days later than what? Is that 60 days, 90 days? Even on 30 days, i11 days is a long time, and it’s not OK!”