Carnell releases report on payment times and terms

ASBFEO probe shows big enterprises ‘fear transparency’

Carnell releases report on payment times and terms
The report’s cover


Federal small business minister Michaelia Cash should push forward with a range of initiatives including an annual payments reporting framework for big organisations, the small business ombudsman advises.

The advice, which follows a request by Cash for a deeper look at payment times is contained in seven recommendations in a report from Australian Small Business and Family Enterprise Ombudsman Kate Carnell’s office, titled Review of payment terms, times and practices Advice to the Minister For Small And Family Business, Skills and Vocational Education.

The report shows payment times greater than 30 days makes up 66 per cent of transactions.

Read Carnell’s advice to an investment impediments inquiry, here

"Our key learning from this review of payment terms, times and practices is the hesitancy of many large corporations to be transparent about their payment terms and, more importantly, how often they actually meet those terms. Why? Because they fear it makes them less competitive at the expense of their small business suppliers," Carnell states in a letter to Cash.

"This simply underlines how critical the need for a public register of payment terms and the performance against same, has become.

"Small businesses are the drivers of our economy and must be able to compete fairly in the open market place."

If accepted, those organisations and firms with a turnover of more than $100 million, including government entities and foreign companies, would have to:

  • establish and maintain a register of their payment terms offered to small business
  • include performance against stated terms, updated at least annually
  • establish a small business payment times and practices complaints portal
  • conduct poor-practice deep dive reviews of large businesses, industry or government sector supply chains
  • highlight best practice.

"We received over 2,400 surveys from small and family businesses across the country raising issues on late payments and long payment times," Carnell says.

"We also engaged with more than 250 large businesses, requesting a copy of their current small business supplier payment terms and conditions.

"One of our key learnings from this review is the hesitancy of some of Australia’s most well-known companies to be open about their payment terms and, more importantly, how often they actually meet those terms.

"Despite having small business supplier definitions, some large businesses could not identify how many of their suppliers were small businesses.

"This significant finding underlines the critical need for an independent annual reporting framework that tracks the performance against payment terms of large Australian and multinational corporations and government entities.

"It also points to the need for the government to modernise business registers so small business suppliers can be more easily identified.

"In November last year the government announced its suppliers will be paid within 20 days for contracts up to $1 million by 1 July 2019 and it will develop an annual reporting framework requiring large businesses over $100 million in turnover to publish their payment information.

"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."

Other recommendations are:

  • ASBFEO to work with the Government on its initiative to modernise business registers to enable the identification of small business suppliers
  • ASBFEO to work with the ACCC to review supplier terms and conditions including extended payment terms, termination clauses and non-disclosure agreements
  • where appropriate, mandatory Government industry codes that regulate business-to-business transactions to include minimum small business supplier payment terms
  • ASBFEO to review the impact of supply chain finance strategies offered by large businesses to offset extended payment times, such as invoice factoring, on the cash flow of small businesses.
  • ASBFEO to review the costs, benefits and impediments to the uptake of e-invoicing and other technology solutions to improve the efficiency and accuracy of invoicing

The federal government to mandate the use of deemed statutory trusts in the Australian Building and Construction Building Code for all public works and construction projects. "To be effective this must cascade down the supply chain," the report says.


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