The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell said she might have “no choice” but to recommend federal legislation requiring all businesses to be paid in 30 days.
It is not the first time Ms Carnell has called for payment times to be legislated, having spent years leaning on the government to take action on big business.
In 2017, the government moved to introduce a 15-business day payment term for small business suppliers — changes which are still yet to be introduced.
“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,” Ms Carnell said.
“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.”
Ms Carnell noted that there is a significant economic impact from late payments to small business suppliers.
“Late payments by large businesses to small businesses account for 53 per cent of all invoices,” she said.
“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.”
This comes in the wake of the ASBFEO’s position paper outlining the key preliminary findings of its review into supply chain financing.
“So far, our Supply Chain Financing Review has revealed the voluntary Supplier Payment Code is just not working,” she said.
“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.”
Ms Carnell is seeking feedback on the report before making formal recommendations, with the final report expected to be handed down at the end of March.