Big business payments to small suppliers slammed as “woeful” by Ombudsman

- February 20, 2023 3 MIN READ
Annoyed man waiting for money owed

A vast number of big businesses just aren’t meeting the mark when it comes to paying their smaller suppliers and it’s causing needless harm and cash flow challenges for business owners, writes Australian Small and Family Business Ombudsman Bruce Billson.

Woeful figures released by the government regulator reveal only three out of ten big businesses pay within 30 days, while nearly one-quarter take more than 120 days to pay up.

The Payment Times Reporting Regulator’s data on payment performance is collected from more than 7,000 big businesses, many with a turnover of more than $100 million.

Analysis of that data by the ASBFEO reveals there has been virtually no improvement in payment times by big business over the past six months.

It shows:

  • 24 per cent of big business take more than 120 days to pay their small business suppliers.
  • 9 per cent take between 61 and 90 days to pay.
  • 36 per cent take between 31 and 60 days to pay.
  • 18 per cent take between 21 and 30 days to pay.
  • 13 per cent pay their bills in fewer than 20 days.

Big businesses operating in manufacturing, construction and retail trade sectors recorded the worst performance.

  • Only 15 per cent of manufacturing businesses paid their small business suppliers within 30 days.
  • Only 18 per cent of big construction businesses paid small business within 30 days.
  • Only 24 per cent of big businesses in retail trade paid small businesses within 30 days.

The best performers were big businesses operating in public administration and safety, but it was still only just over half (51 per cent) of small business invoices paid within 30 days.

This just puts pressure on other parts of the economy when cash flow is critical for those smaller enterprises and is nothing more than a crude display of power imbalances.

Young man looking worried over recieipts and financial papers

Late payments push businesses to the brink

Small and family businesses have kept their side of the deal by providing goods and services, so big business should do the right thing and pay bills in a timely fashion.

I urge our nation’s big business leaders to get serious and recognise that their small and family business suppliers are a vital cog in what they do, and crucial to our economy and our communities.

Making small businesses wait four months or more to be paid is shabby.

Cash flow is the oxygen of enterprise and so many small businesses secure their working capital funding by getting a mortgage over their home, so it’s more than just a job – it’s their life.

Small business owners calling for help

More than 40 per cent of the assistance cases to my office relate to payment times and it’s pleasing the Australian Government is taking this issue seriously by appointing former minister, Dr Craig Emerson, to review the Payment Times Reporting scheme introduced by the former government. The transparency and disciplines on big business payment performance the scheme hoped to deliver haven’t resulted in improved payment performance.

Dr Emerson’s review is looking at ways to improve big business payment times, terms and performance for small businesses and will consider the introduction of mandatory payment times.

We saw during COVID that some of our larger business prided themselves on paying small business suppliers in a handful of days. Sadly, they are the exception as only 13 per cent of big businesses pay within 20 days.

At a time when small and family businesses are facing headwinds, surely it’s not too much to ask that their big business customers play their part by paying their invoices in a more timely way. There is abundant scope for big business to lift their game.

We just need the broader business community to get the simple message – good business pays.

This article was first published on Kochie’s Business Builders, read the original here

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