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Small Business Ombudsman wants 30-day payment times legislated

- April 20, 2020 2 MIN READ
kate carnell

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell has called for federal legislation requiring small businesses to be paid in 30 days, amid a fresh wave of big businesses using the COVID-19 crisis as an excuse for poor payment times.

It’s a key recommendation made in ASBFEO’s final report regarding its Supply Chain Financing Review, released by Ms Carnell today, which reflects a recent surge in larger businesses pushing out payment times to their small business suppliers.

“Large businesses extending or in some cases, suspending payments to small businesses are on notice that this behaviour is unacceptable,” Carnell says.

“There’s no denying businesses of all shapes and sizes are enduring extraordinary challenges as a result of the Coronavirus crisis, but small businesses are being hit hardest.

“Many small businesses have been forced to close their doors and a lot may not survive the coming months, even with significant support from the government. That’s why it is more important than ever to ensure small businesses are paid on time.

“We know that if small businesses are paid on time, the whole economy benefits. On the flip side, a lack of cash flow is the leading cause of insolvency.

“Legislation requiring SMEs to be paid in 30 days is the only way to drive meaningful cultural change in business payment performance across the economy.

“If Australia were to go down this path, it would not be alone. Just recently, legislation was tabled in the UK that stipulates a uniform 30-day statutory limit for payment of invoices and provides for enforcement of financial penalties for late payments.

The Supply Chain Financing Review calls out several household-name businesses that have engaged in poor payment practices.

“MYER, David Jones, Just Group, Sussan Group, Carlton United Brewery and CIMIC are named in the report as having payment policies that are damaging to their small business suppliers.

“Our Review has revealed the voluntary Supplier Payment Code is not effective. There is no compliance monitoring and it is actually unenforceable. This is consistent with similar systems internationally.

“While we support the Payment Times Reporting Framework as a useful tool, it’s unlikely to result in the systemic change that is needed.

“When used appropriately, supply chain finance is a legitimate and effective product that can be used to free-up cash flow for small and family businesses. In fact, it may be particularly useful to small businesses that need to be paid faster as they navigate their way through the COVID-19 crisis.

“However it is critical that harm inflicted on small businesses as a result of misuse of these products be urgently addressed,” Carnell concluded.

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