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Supply chain financier to stop working with ‘bully’ big business

Maja Garaca Djurdjevic
Maja Garaca Djurdjevic
10 February 2020 1 minute readShare

In another win for small business, Greensill Capital has pledged to stop providing its supply chain finance services to big companies that do not offer fair payment terms.

Last week, both Telstra and Rio Tinto backtracked on their policies and committed to 20-day payment terms for SMEs, just days after it was reported that both companies were turning to technology to push suppliers to shave their invoices in exchange for prompt payments.

Now, supply chain finance giant Greensill has also come forward, saying that it won’t be used as a whipping boy for the bullying of small business by their larger peers.

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Greensill operates a reverse factoring process, whereby it acquires invoices from the suppliers of its customers for a fee and packages them into short-dated bonds that are sold to investors.

However, the company has now said it’s ceasing its relationship with businesses that have poor payment terms, that is, in excess of 30 days.

 

Greensill’s decision has been applauded by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), following the release of its supply financing position paper on Friday, providing a suite of draft recommendations to be finalised before a full report is handed down at the end of March 2020.

“We are delighted to see that Greensill Capital will no longer provide their product to businesses with poor payment terms,” ASBFEO Kate Carnell said.

“Where payment terms are 30 days or less, supply chain finance should be available to those small businesses that want to be paid faster.

“We have a real problem when large businesses extend their payment terms from 30 days to 60, or even 90 days, and then offer a supply chain financing product to those small business suppliers who are forced to take a haircut to get paid on time.”

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She praised Greensill Capital, along with Telstra and Rio Tinto, for showing corporate leadership on this issue.

“We will continue to monitor Australia’s other corporate players and encourage them to follow the leadership of these companies.”

‘Unenforceable’ supplier code

Among its recommendations, the ASBFEO took aim at the definition of a small business, explaining that this is where the problem begins.

“There are too many small businesses that have to wait too long to get paid. This is in part because the definition of small business is wide open to manipulation under the Supplier Payment Code.”

However, even putting aside the issue of manipulation, she noted that the Supplier Payment Code is voluntary, meaning there is no compliance monitoring.

As a result, the ombudsman has made a draft recommendation that the Payment Times Reporting Framework replace the Supplier Payment Code, with that framework being administered and enforced by an appropriately funded, empowered and proactive entity.

Supply chain financier to stop working with ‘bully’ big business
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Maja Garaca Djurdjevic
Maja Garaca Djurdjevic

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. 

You can email Maja on [email protected] 

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