Australia SMB Ombudsman Calls For Late Payments Legislation

Australian Small Business & Family Enterprise Ombudsman Kate Carnell is calling for federal legislation mandating that small- to medium-sized businesses (SMBs) be paid in 30 days, according to a LinkedIn post she wrote.

She wrote that her office experienced a tide of large companies “using the COVID-19 outbreak as an excuse for poor payment times.”

“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,” Carnell wrote in the post. “That’s why it is more important than ever to ensure small businesses are paid on time.”

The official pointed out that the Supply Chain Financing Review notes that multiple well-known name companies “have engaged in poor payment practices.” They were called out in the report as having payment policies that are negatively impacting small suppliers.

“When used appropriately, supply chain finance is a legitimate and effective product that can be used to free-up cash flow for small and family businesses,” Carnell wrote. “In fact, it may be particularly useful to small businesses that need to be paid faster as they navigate their way through the COVID-19 crisis.”

The official, however, noted that “Our Review has revealed the voluntary Supplier Payment Code is not effective.”

Separately, new research conducted by Scottish Pacific found that 56 days is the average time that it takes Australian companies to receive payment. A survey of 1,200 SMBs showed that suppliers wait almost two times the 30-day payment timeframe that Australian officials have sought, with smaller companies encountering an even lengthier 66 days, on average, to receive payment.

Xero researchers have found that 8.6 days past-due is the average payment timeframe for New Zealand SMBs. On any particular day, an SMB is owed 7,000 New Zealand dollars ($4,224), with over 7.4 billion New Zealand dollars ($4.5 billion) in collective debt outstanding to small companies.