Ombud report warns that nearly half of big biz are failing to pay SME suppliers on time

More than half of the country’s big corporations fail to meet their deadlines for paying their small business suppliers, according to the most recent data from the Payment Times Reporting Regulator. 

The report finds: 

  • Only 47 per cent of large organisations paid more than 80 per cent of their suppliers within the agreed-upon deadline. 
  • The average contract payment terms decreased slightly to 36.2 days from 36.6 days. 
  • According to the Business Council of Australia’s standard, only 31 per cent of large corporations paid more than 80 per cent of their small business invoices within 30 days.

The Payment Times Reporting Regulator has published its second report about the payment policies of 7000 businesses with an annual turnover of more than $100 million. According to the regulator’s update: “The majority of reports submitted for a second reporting period indicate that entities were not meeting their own payment terms offered to small business.” 

The Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, notes that while stated payment goals have slightly improved, real payment performance has deteriorated to the point where even the mediocre 30-day payment objective has not been met.

“I applaud those companies paying on time, particularly those who pay their small business customers in far fewer than 30 days. But this report tells us that far too many big businesses are falling well short of paying on time,” Mr Billson said. 

“COVID-19 has made the problem worse. Payment disputes represent 40% of requests for assistance received by our office. Before COVID-19, this proportion was around 25 per cent. 

About one-in-four calls for assistance to the Ombudsman centred around construction businesses, and 17.5 per cent were in the transport, postal and warehousing sectors.

“Cash flow is king for small and family businesses and if they are paid on time, the benefits spread through the entire economy,” Mr Billson said. “We must not forget that two out of every five people with a private sector job work in a small business.” 

“As COVID-19 infection rates play havoc with staffing illness and availability, more is being asked of small business and family enterprise owners and leaders as they seek to cover roster gaps and sick days amongst their teams just to keep their doors open to serve their communities and they should not be further disadvantaged by not being paid.” 

The regulator’s report confirms a recent report by CreditorWatch, which found the proportion of businesses with payments in arrears by 60 days or more had increased in almost every industry sector. 

Furthermore, the Business Council of Australia has recognised the critical importance of being paid on time by creating its supplier payment code urging big businesses to pledge to pay small business customers and suppliers within 30 days. 

As the BCA itself says: “Paying small business suppliers on time is critical to easing stress, supporting their ability to expand, keep healthy cashflows and employing more people.” 

Mr Billson said a great way to improve payment times is to adopt e-Invoicing. “It enables more timely payment, cuts the administrative burden and is more secure than posted or emailed invoices, reducing the chance of invoice fraud or scams,” he said. 

Around 1.2 billion invoices are exchanged annually in Australia, but 20% are sent to the wrong individual, and 30 per cent contain inaccurate information. A paper invoice costs roughly $30 to process, whereas an e-invoice costs less than $10.

Keep up to date with our stories on LinkedInTwitterFacebook and Instagram.