Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), welcomed the announcement by the NSW that it will pay small businesses in five days by the end of 2019 as a major step forward to improving the cash flow drain on smaller firms.
“Cash flow is king. A lack of cash flow is the leading cause of business insolvency and this underscores the importance of prompt payments,” she said.
“Last year ASBFEO, in partnership with the Small Business Commissioners in New South Wales, Victoria, South Australia and Western Australia, and the Council of Small Business Australia, conducted an inquiry into payment times and practices in Australia,” she said.
“The inquiry found late payments and extended payment terms are a big issue for small businesses, and that governments have a key role in leading by example.”
Ms Carnell noted that the federal government has taken steps to speed up payment times, committing to 20 calendar day terms across all agencies for contracts up to $1 million by 1 July 2019, as well as faster processing of invoices to contractors.
But state governments, along with multinationals, have long been derided for being the worst payers in the country.
She called on other state governments, as well as local councils, to follow suit.
“If the NSW Government can fast-track their payment policy, first to 20 days by the end of this year and then to five days, every level of government can and should do the same,” she said.
Ms Carnell also criticised the multitude of large businesses for effectively abusing their market power by not promptly paying their invoices.
“Big business should also step up to the plate with faster payment times, instead of the 90 or 120 days we see from some well-known big companies at the moment. That is abuse of market power.”
Speaking at the National Small Business Summit, Ms Carnell said her office will continue to push for regulated payment terms, noting that Australian SMEs face among the slowest payment rates in the OECD, led by multinationals who believe that without mandated time frames, they are free to pay whenever they like.