The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell says the voluntary Supplier Payment Code is ineffective and if the government is serious about getting big business to pay small business on time, legislation may be required.
Carnell’s comments follow recent scandals surrounding reverse factoring in which certain larger corporations were miming data to discover just how much of a discount they could get off a supplier’s invoice if they agreed to pay promptly.
The resulting uproar surrounding supply chain financing caused two of the nation’s largest corporations to commit to 20-day terms. However, Carnell says if big businesses continues to flout reasonable payment terms, she will have no choice but to recommend federal legislation requiring all businesses to be paid in 30 days.
“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 says.
“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.
“Late payments by large businesses to small businesses account for 53 per cent of all invoices. That’s $115 billion paid late to small businesses – equivalent to $7 billion of working capital to Australian small businesses every year.
Carnell says the economic case for faster payment times is clear. not just in Australia but internationally.
“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.”
“So far, our Supply Chain Finance Review has revealed the voluntary Supplier Payment Code is just not working. The Code is voluntary, there is no compliance monitoring and it’s actually unenforceable.
“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.”
The ombudsman will present her final report at the end of March and is seeking recommendations from small business owners.. Contributions to the Supply Chain Financing Review can be emailed here