Telstra has been commended for moving to 20-day payment terms for SMEs, just days after it was reported that the telco will use a technology firm to create a payday lending scheme, which would push suppliers to shave their invoices in exchange for prompt payments.
Company chief executive Andrew Penn announced on Tuesday that having recognised the importance of cash flow to business, Telstra will pay invoices from 85 per cent of its suppliers within 20 days before the end of this year.
“This will mean small and medium businesses across the country will have cash in their hands sooner,” Mr Penn said.
Back in 2017, Telstra made a commitment to pay suppliers that are small businesses within 30 days. However, under this new arrangement the giant will move to 20-day payment terms for any supplier with invoices of up to $2 million annually.
“When we started this process in 2017, we used the Australian Bureau of Statistics’ definition as to what a small business was. Three years later, these definitions have shifted as part of our ever-diversifying economy,” Telstra chief financial officer Vicki Brady said.
“Our new methodology for paying invoices within 20 days captures more businesses than ever, and we encourage governments and the small business ombudsman to create a new standard, consistent definition of small business to ensure everyone is playing by the same rules.”
‘Fantastic news for small business’
The small business ombudsman was quick to commend the company, calling the move “a fantastic result for the small business community”.
“Telstra is leading by example with its commitment to faster payment times, and there’s no reason why other big businesses shouldn’t adopt the same practices,” Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell said.
“Cash flow is always king for small businesses and never more so than now, particularly for small businesses in bushfire-affected communities.
“Telstra’s efforts will make a considerable difference to 85 per cent of its suppliers. These are mostly small businesses that no longer need to accept a supply chain finance option to be paid as they should be.”
Ms Carnell opined that given that the definition of a small business continues to be a major point of confusion, a unified approach would benefit Australian small businesses greatly.
“My office is committed to continuing to work with the business community to agree on a standardised definition.
“Overall, Telstra is showing real corporate leadership, and other businesses are encouraged to follow its lead.”
Telstra in hot water
Just last week, Telstra found itself in hot water, when The Australian revealed that the telco had partnered with tech firm Taulia to create a payday lending scheme, which would offer suppliers a cut on the invoices in exchange for prompt payments.
The Australian further found that Taulia uses artificial intelligence and big data mining to calculate just how much of a cut suppliers are willing to and could take.
At the time, the ASBFEO responded with a warning, telling big businesses that the practice of using supply chain finance products that mine big data to manipulate small businesses is unacceptable.
“It’s clearly not OK for big businesses to use their dominant position and access to technology to further squeeze small business margins,” she said at the time.
The ASBFEO is expected to release the findings of its review into supply chain financing before the end of April.
Maja Garaca Djurdjevic is the editor of My Business.
Maja has an extensive career as a journalist across finance, business and market intelligence. Prior to joining Momentum Media, Maja spent several years unravelling social, political and economic intricacies in Eastern Europe.