Government To Crack Down On Late Payments To Small Businesses

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One of the most persistent concerns that for small businesses is cash flow. It's no surprise given that Australian companies are ranked as the worst in the world when it comes to paying outstanding invoices, according to a recent report. In particular, big businesses drag their feet when it comes to paying small businesses. Now the Australian Small Business and Family Enterprise Ombudsman Kate Carnell has launched an inquiry into the matter and is looking at possibly bringing in some regulation that will punish larger organisations that are late in paying money owed to the smaller end of town.

Carnell has dubbed late invoice payments as the "silent killer" of small businesses and has launched the Payment Times and Practices Inquiry in a bid to tackle this issue.

In an interview with ABC 702 Breakfast radio, she referred to an international study of over 80 countries by Market Invoice that showed Australian organisations are the worst at paying overdue invoices. In Australia, the average amount of time it takes for an invoice to be paid is 26.4 days overdue.

While payment times on average have come down, largely because small to medium firms are good at paying each other, big businesses are failing the smaller guys. Carnell noted that large organisations and even government agencies, mainly schools and councils, are using their market power to delay payments owed to small businesses.

"[T]hose are the companies that’ve got a capacity to pay quicker. And yes, they’re doing it because they can, they’re using small business people fundamentally as banks I suppose – very cheap banks – and we just think that’s not acceptable; it's impacting upon on our economy, so we’ve launched today an inquiry into this."

The Australian Small Business and Family Enterprise Ombudsman will be taking submissions for the inquiry. She will be making recommendations as to what can be done help small businesses recover money that is owed to them in March 2017.

[ABC 702 Breakfast]


Comments

    If you're a small business owner, we'd like to hear about your experiences in dealing with late payments. Tell us all about it here!

      My last client was the QLD Gov! Took 8 weeks to pay the first $1,000 invoice which was due on project signing!

        Interesting! Is this your first time working with a government agency?

      My businesses do not work with the government or government related businesses anymore due to excessive payment delinquency. Other businesses that I've worked with have had to shut up shop because of the governments inability to pay invoices on time. This is especially the case around election times that affect the region, state or federal, the government just stops doing anything for an extended period of time, it's quite ridiculous.

        Didn't realise that government agencies are so hopeless at making payments. Thank you for sharing your experience with us!

    Just make each overdue day accrue interest. They would be paying quick smart then.

      Agreed! Will be putting that clause in the next invoice.

      And then watch them go to another supplier.
      The business I work for I used to late payments a small when putting things like that in tenders we will loose the tender to some one else. Even if they are slightly more expensive.

      Last edited 17/11/16 5:58 pm

    The government has become extremely aggressive in getting money out of small businesses (i've watched from the sidelines). Forcing big business to pay up makes it easier for smaller businesses.

    if Kate can also do something about the extreme behaviour of the government for small businesses, that would help a lot. One accountant I spoke to suggested many businesses are under extreme pressure because of the ATO, irrespective of good history or not.

      Kate Carnell has a good record of rash no thought decisions. Well she at least did in her time as former ACT chief minister.

    Insurance companies!

    I manage an independent panel shop and insurance companies are taking much longer these days for offer settlement claims. Once offer is accepted they take another 14-60days for payment. We sometimes don't pay our own wage when we start running low on cash reserves (currently happening again for over 2 months).

    Their master plan is monopolise the entire repair market. We're used to their shady practises. As long as we pay the employees and the bills we can hope. Others cannot wait, either give up and close up or sign their life away to evil contracts which in turn close them down anyway..

    Last edited 19/11/16 11:41 am

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