Review into payment times established
A newly announced review into payment times will aim to measure the effects of late or extended payment practices on the cash flow of small businesses.
The review announced by the office of the Australian Small Business and Family Enterprise Ombudsman followed a written request from the Minister for Small and Family Business, Skills and Vocational Education, Michaelia Cash.
The ASBFEO included a five-minute survey for small and family businesses to fill out so it can get a better idea of the state-of-play on payment times and practices in Australia.
The survey questions include what payment times are in a small business’ contract, whether they have to provide a discount if they want to be paid in 30 days or less, and if they’re paid later than the contract states, among others.
ASBFEO Kate Carnell said the office has also written to large corporations requesting a copy of their payment terms and conditions to suppliers.
“Extended payment times for suppliers effectively uses the businesses in the supply chain as a cheap form of finance. Too many small and family businesses are being crippled by slow payments and the national economy suffers as a result,” Ms Carnell said.
“When a business experiencing extended payment times is also hit with late payments, it stresses the business further, which can easily put them out of business. Poor cash flow is the primary reason for insolvency in Australia.”
Ms Carnell also cited the ASBFEO’s Payment Times and Practices Inquiry from last year, where it found Australian payment times were the worst in the world, with invoices paid on average 26.4 days late.
“We identified a growing trend for large Australian and multinational companies to delay and extend payments from 30 days to 45, 60, 90 or 120 days,” she said.
“More recent research involving 1,600 businesses identified the biggest cause of business disputes is payments (44 per cent), with either the full amount not being paid (26 per cent) or not being paid on time (18 per cent).
“Partial and late payments, seeking discounts to pay in 30 days, offering loans to cover extended terms, all place stress on the cash flow of small businesses. It forces the business to find ways to finance the short fall in their working capital.”