Coles pledges to pay small suppliers within 14 days: “We want to help their businesses to flourish”
Friday, March 3, 2017/
Supermarket giant Coles says it will introduce a 14-day payment time policy for small suppliers that provide up to $1 million in merchandise to the supermarket annually, as the Small Business Ombudsman continues to highlight late payments as the number one thing making SMEs “crazy”.
Coles chief executive John Durkan unveiled the plan on Wednesday in a move that the grocery chain says will benefit more than 1000 small suppliers.
The new payment timeframe will come into effect on July 1, 2017, and apply to smaller suppliers that submit electronic invoices to the company.
“Coles relies on small Australian businesses to deliver thousands of different products for our customers every day. By providing a little extra support, we want to help their businesses to flourish so that together we can keep providing our customers with great quality and value,” Durkan said in a statement provided to SmartCompany.
The supermarket’s current average payment times are 30 days, but Coles says suppliers currently on terms of less than 14 days will not be affected by the policy.
The announcement comes the day after Australian Small Business and Family Enterprise Ombudsman Kate Carnell told a Senate Committee that after talking to hundreds of business owners over the past year, the thing that was making small businesses “the most crazy” was late payments, particularly from bigger businesses.
“Right up at the top … [the top concern] was that people were paying slower,” Carnell told a Senate Economics committee yesterday.
The Ombudsman is currently completing a self-directed inquiry into payment times, which Carnell told the committee has so far heard from 2500 small businesses. The inquiry is expected to be completed by the end of next month.
Carnell has urged other big businesses to take a similar approach to Coles, highlighting that SMEs have traditionally had very little power when it comes to negotiating payment terms.
“Cashflow is king for small businesses, so for a big player like Coles — one of the country’s largest supermarket retailers — to take affirmative action on this is a welcome move that will make a big difference in the lives of hundreds of small businesses,” she said in a statement this morning.
The supermarket is not the first to look at supplier payment times this year, however; Telstra chief executive Andy Penn recently committed to working towards 30-day payment terms for suppliers after being prompted on the issue at an event for his company’s business awards in February.
The Ombudsman has called on small businesses to continue to share their stories on the impact of late payments on their survival in a competitive business landscape.
Recent research has shown that cashflow issues have an effect not only on the profitability of smaller businesses, but how much freedom they have to invest in new projects and technologies.
According to SmartCompany’s 2016 Technology Survey, 40% of small businesses say budget constraints are a top concern for using and investing in technology for their businesses.
Meanwhile, a recent study from Xero shows big business are major offenders when it comes to late payments, with the businesses surveyed reporting that one in five of their invoices that are overdue by 30 days or more come from ASX200 businesses.
Small Business Minister Michael McCormack has previously flagged payment times as one of the top concerns he hears about when speaking to SMEs across the country.
“From Australia’s largest cities to its smallest towns and villages, small businesses tell me cashflow is king,” the Minister said in January.
The move by Coles has gained support from businesses and politicians on social media this morning. Minister for Innovation, Industry and Science Arthur Sinodinos said the announcement is a positive step for big businesses supporting SMEs in the community.
Coles announced today that it is cutting payment times
by half to small suppliers – great to see big biz supporting our small
— Arthur Sinodinos AO (@A_Sinodinos) March 2, 2017