Small business 30-day payments to be legislated after surge in delays
Monday 20 April 2020
This is according to the final report of the Australian Small Business and Family Enterprise’s (ASBFEO) Supply Chain Finance Review, which found a surge in big companies using the coronavirus crisis to justify poor payment times.
“Large businesses extending or in some cases, suspending payments to small businesses are on notice that this behaviour is unacceptable,” ASBFEO Ombudsman, Kate Carnell said.
Carnell today called for federal legislation that would require small businesses to be paid in 30 days, following on from the report’s recommendations.
Currently, only signatories of the Australian Supplier Payment Code are committed to the 30-day payment limit.
“Our review has revealed the voluntary Supplier Payment Code is not effective. There is no compliance monitoring and it is actually unenforceable,” Carnell said.
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These calls come after the government announced a Payment Times Reporting Framework late last year, which requires companies with over $100 million in annual turnover to publish information on how they pay small businesses.
Carnell said while this framework is useful, “it’s unlikely to result in the systemic change that is needed".
“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.”
Instead, enforceable rules around payment times, with penalties in place for non-compliance, may be the best way to keep these big businesses in check and help small businesses more promptly receive the finance they need to stay afloat.
“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,” Carnell said.
“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.”
For more information on small business hardship assistance options, check out our guide to Australia’s coronavirus financial support for small businesses.
Or if you’re looking for a cash flow boost, scroll down below for some business loan offers.