Small businesses can no longer stand to be the banks for big companies.
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This is a crushing problem and not only impacts cash flow and business growth but has significant repercussions for owners and their families.
Small businesses can no longer stand to be the banks for big companies and the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell has identified this issue as one of the greatest problems impacting the small business community.
Australia ranks very poorly when it comes to on time payments, having one of the highest average late payment periods in the world. In fact, $26 billion of supplier invoices are currently sitting in the unpaid pile.
Calls for a nation-wide inquiry
The ASBFEO has called for a national inquiry into the problem saying that “survey after survey on the issue showing that businesses – namely the big end of town – are delaying payments to those that can least afford it; small-to-medium sized enterprises.”
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The inquiry will investigate the relationship between small enterprises and large corporations including the recent announcement by heavyweights like Fonterra and Kellogg that they will have an international 120-day supplier invoice payment period.
On a local level, small businesses are already reeling from Woolworths shifting its payment terms from 30 to 60 days. While both Coles and Woolworths have implemented a “pay-on-scan” system, according to recent reports.
For local small business suppliers, already stretched on price point and other pressures, it is a troubling trend. Many argue they are being used as a bank to multinationals.
Small businesses can not wait four months to be paid.
Kate Carnell says that “around 90 percent of small businesses go broke because of cash flow problems.”
“We have to overcome the view that big companies can keep paying late.”