Around half of Australia’s big businesses are failing to pay small business suppliers on time, according to the country’s small business and family enterprise ombudsman.
According to the Payment Times Reporting Regulator, just under of half the country’s businesses with an annual turnover of over $100 million (US$70 million) managed to meet payment deadlines to 80 percent of their supplier invoices.
“Small businesses are not asking to be paid early, just to be paid on time. Put simply, good business pays.”
Only 31 percent of big businesses paid more than 80 percent of their small business invoices within 30 days, a benchmark set by the Business Council of Australia.
Billson said the 30-day benchmark was “mediocre” to begin with and stressed the need for the business community to get serious about it.
“Delaying the timely payment of your small business supplies serves no good and just puts pressure on other parts of the economy when cashflow is really critical for those smaller enterprises.”
Affected by the Pandemic
Billson said situation had been worsened during COVID-19, with payment disputes now representing 40 percent of requests for assistance to his office, up from 25 percent prior to the pandemic.Around one quarter of requests came from the construction industry, which has experienced supply chain challenges.
Small business owners were hit hardest by the pandemic and staff shortages caused by COVID-19 restrictions, with Billson saying they should not be further disadvantaged by not being paid.
Funding solutions advisor Optipay also found that businesses overall were taking longer to settle invoices, putting pressure on cashflow for small and medium enterprises.
Its own research found that over the last six months, the average number of days invoices remain outstanding has increased from 31 to 38 days.
Sedgwick noted that after the Australian Taxation Office resumed tax debt collection, which was put on hold during COVID-19, many businesses were “suddenly realising” their cashflow options are now limited.
“Banks are tightening their lending and there are no more government handouts, so unfortunately, pain is on the way for many SMEs,” he said.