Nov 14, 2018

Payment times under scrutiny

Payment times under scrutiny

The North Queensland Civil Construction Association is urging members to make their voice heard in a new nationwide review focusing on the stress to small business from large companies delaying project payments

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell this week announced the payment times review, including a survey for small businesses to fill out. (Click here for survey link)

It comes after extended payment terms emerged as a prime source of angst during the inquiries of a federal committee looking into the resources sector and regional business.

Payment terms are also firmly on the agenda for the North Queensland Civil Construction Association.

President Phillip Cassell said the issue had evolved in the civil construction industry as well to the point where late payment to small contractors and subcontractors was common practice and the attitude was simply “if you want the work, you deal on our terms”.

“As president of the NQCCA, I recently had this discussion with the Shadow Minister for Small Business Fiona Simpson,” he said.

“It was discussed that if major government projects were paying 14-day terms or, at worst, 30-day terms – why are the bigger national companies paying 30–60 days from EOM (end of month)?

“They use the cash flow to their advantage while utilising smaller contractors’ overdraft and credit facilities to finance the projects.

Phillip Cassell.

“This is quite common in our industry and it needs to stop.

“It is the intention of the NQCCA to have governments agree to the same payment terms for all stakeholders involved in the project.”

He said late payments flowed down the line to affect multiple parties in the supply chain and had been directly responsible for many smaller businesses, and even some larger ones, falling over with significant debts.

Ms Carnell said the 2017 Payment Times and Practices Inquiry had found Australian payment times were the worst in the world, with invoices paid on average 26.4 days late.

“We identified a growing trend for large Australian and multinational companies to delay and extend payments from 30 days to 45, 60, 90 or 120 days,” she said.

The practices of partial and late payments, seeking discounts to pay in 30 days, and offering loans to cover extended terms, all placed stress on the cash flow of small businesses, she said.

The new review includes the online survey of small and family businesses, while large corporations have been asked to provide a copy of their payment terms and conditions to suppliers.

“Extended payment times for suppliers effectively uses the businesses in the supply chain as a cheap form of finance,” Ms Carnell said.

“Too many small and family businesses are being crippled by slow payments and the national economy suffers as a result.”

 

 

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