Should the Morrison government move to outlaw payment terms beyond 30 days?
That’s the question being asked in the wake of the Australian Small Business and Family Enterprise Ombudsman (ASBFEO)’s supply chain finance position paper, released last week.
Small business ombudsman Kate Carnell yesterday floated the idea of outlawing late payment terms, saying if big businesses continued to “flaunt reasonable payment times”, she would have no choice but to recommend the Morrison government take action.
“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 said in a statement circulated Wednesday.
“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.”
While Telstra and Rio Tinto did take the lead, so to speak, in announcing a reduction to payment terms for SME suppliers in recent weeks, they did so only after reports in The Australian exposed their attempts to push supply chain finance on business partners.
But the backflips have nevertheless reignited debate about payment terms for small business suppliers in Australia, with Carnell earlier this week calling for the Business Council of Australia’s Supplier Payment Code to be scrapped.
“Late payments by large businesses to small businesses account for 53% of all invoices,” Carnell said Wednesday.
“That’s $115 billion paid late to small businesses — equivalent to $7 billion of working capital to Australian small businesses every year.
“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.”
Carnell is due to hand down final findings from the supply chain finance review at the end of March.
Businesses with views about payment terms are encouraged to contact the ombudsman to provide their perspectives.