Small businesses fed up with late payments

Wednesday 19 April, 2017 | By: Default Admin | Tags: late payments, payment times, small business ombudsman, big business

More and more Queensland small businesses are being caught in the late payment trap with larger companies failing to pay them on time.

The Australian Small Business and Family Enterprise Ombudsman (ABSFEO) handed down the final report last week into Australia’s dismal payment times and practices that small businesses currently endure.

Data from across the globe compiled in the ‘Late Payment Report 2016’ showed that some of Australia’s larger companies are substantially lagging behind the rest of the world in terms of late payments, with smaller businesses being paid an average of 26.4 days’ late.

This is significantly slower than other late-payers in countries such as Mexico (18.6 days) and South Africa (16.5 days).

The ASBFEO report details the trend in payment terms and late payments from large corporations and the effects they have on small businesses.

Findings show that the growth in extended payment times has been linked to large businesses effectively using the businesses in the supply chain as a cheap form of finance.

CCIQ Senior Policy Advisor Catherine Pham said the inquiry recognised that small business suppliers have long been placed at the bottom of the food chain for corporates.

“Late payments have become ‘normal’ for small businesses, despite them often providing vital products or services to these larger companies. This is a predatory practice that needs to stop,” she said.

“Three out of every five businesses believe late payments are increasing in frequency year on year.

“This highlights the fundamental culture of systematic late payments to SMEs and the challenges that lie ahead in stemming the growing practice of late payments.

“It’s going to take some hard measures to put a stop to this and we will be looking to government to implement a number of the recommendations in the report around stopping large corporations from using small businesses to finance their multinational conglomerates.”

Ms Pham said small businesses could take some measures to alleviate the problem.

“There are things businesses could do in the meantime. Incentives to pay on time such as applying discounts before the due date as well as penalties for late payments should go some way to reducing the number of late payments.”

A CCIQ survey conducted in January this year, which formed the basis of a submission, canvassed more than 250 businesses to better understand the landscape around late payments.

“What we found through our research is that one third of businesses surveyed had more than 20 per cent of their invoices paid late,” Ms Pham said.

“More than a quarter of businesses are experiencing delays of greater than 30 days, which is seven times the global average of invoices paid 4.3 days’ late for SMEs.”

Ms Pham said businesses with a high number of late payments were more likely to experience hardship, with significant time and cost imposts.

“Late payments undoubtedly have an impact on productivity due to the time spent chasing up these invoices.

“It is alarming that one in five businesses spend more than six hours a week chasing up late payments.

“That time could have been better spent on more productive activity that grows their businesses.

“Something must be done.”

CCIQ supports the recommendations in the final report that do not tie small businesses to increased red tape, and have the power to force large corporations into make paying small businesses a priority.

Supported recommendations include the Australian Government mandating 15 business days’ payment times for all its departments, and the introduction of legislation for the top 100 ASX listed-companies and multinationals to publicly disclose all of their payment times, practices and performance.

 

 

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