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.