Big Aussie companies still reluctant to reveal payment times

A report by The Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell, has found some large corporations are reluctant to reveal the timeframes in which they pay their small business suppliers.

“Even businesses who are paying in 30 days and have signed the BCA [Business Council of Australia] supplier code are unwilling to actually report on how often they’ve delivered," Carnell said to Smart Company Australia.

The research, which is based on 2,400 survey responses from SMEs and data from more than a thousand big businesses, found even bigger businesses who have promised to pay invoices in fewer than 30 days rarely keep their word.

Carnell is calling for the creation of an independent reporting framework that would force businesses with more than A$100 million in annual turnover to disclose their payment practices.

Late payment, where businesses get paid beyond contract terms, adds to the cash flow problem faced by suppliers. Bigger companies tend to use this to improve their own working capital efficiencies at the expense of their suppliers.

While the report says the average days to get paid is declining, smaller companies still take 36.74 days to receive payment instead of the expected 30 days. This average obscures the imbalance between large and small business as large business are the worst for late payments and small business the fastest.

This imbalance intensifies cash flow pressure for small and family businesses. Scottish Pacific, an independent finance provider, estimates the cost is A$234.6 billion in lost revenue. That is, SMEs would have generated more revenue if cash flow was improved, as late payments accounted for a 43% downturn in cash flow.

The delayed payments result in small and family businesses having to find other ways to finance the short fall in their working capital. This places stress on smaller businesses and makes them unable to hire more staff and to invest in growth.

“Where large corporations delay payment to their small business suppliers, small business cash flow is unpredictable and presents significant difficulties in their ability to access and service finance. Cash flow is king to small business - poor cash flow is the primary reason for insolvency in Australia,” Carnell said.

In November last year the government announced its suppliers will be paid within 20 days for contracts up to A$1 million by 1 July.