Big companies - including MYER, David Jones, Just Group, Sussan Group, Carlton United Brewery and CIMIC - are using the coronavirus as an excuse for slow payments and forcing many small businesses to close their doors, says Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell.
The Small Business Ombudsman has called for federal legislation requiring small businesses to be paid in 30 days, “amid a fresh wave of big businesses using the COVID-19 crisis as an excuse for poor payment times.
“Large businesses extending or in some cases, suspending payments to small businesses are on notice that this behaviour is unacceptable,” Carnell says. “There’s no denying businesses of all shapes and sizes are enduring extraordinary challenges as a result of the Coronavirus crisis, but small businesses are being hit hardest.
“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.”
The call for new legislation is a key recommendation made in today's ASBFEO’s final report regarding its Supply Chain Financing Review, which reflects a recent surge in larger businesses pushing out payment times to their small business suppliers.
“We know that if small businesses are paid on time, the whole economy benefits," says Carnell. "On the flip side, a lack of cash flow is the leading cause of insolvency. Legislation requiring SMEs to be paid in 30 days is the only way to drive meaningful cultural change in business payment performance across the economy.
“If Australia were to go down this path, it would not be alone. Just recently, legislation was tabled in the UK that stipulates a uniform 30-day statutory limit for payment of invoices and provides for enforcement of financial penalties for late payments."
The Supply Chain Financing Review calls out several household-name businesses that have engaged in poor payment practices. 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.
“Our Review has revealed the voluntary Supplier Payment Code is not effective,” says Carnell. “There is no compliance monitoring and it is actually unenforceable. This is consistent with similar systems internationally.
“It is critical that harm inflicted on small businesses as a result of misuse of these products be urgently addressed.”
