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Cultural change in business payment performance is vital

Maja Garaca Djurdjevic
Maja Garaca Djurdjevic
07 May 2020 1 minute readShare
Kate Carnell AO

The small business ombudsman has commended working capital solutions provider Lex Greensill for following through on its promise not to provide supply chain finance to late-paying businesses, after the company was put under the microscope over its alleged squeeze on suppliers. 

In a public statement on Wednesday, Lex Greensill said it will not allow its supply chain finance (SCF) facilities to be used by Australian clients to extend payment terms to SME suppliers beyond 30 days.

The company warned it will discontinue the use of its SCF facilities to clients who misuse its products by pushing out payment terms.

Greensill’s statement come after its dealings with contractor UGL, owned by construction firm CIMIC, were made public this week.

The companies found themselves under fire for continuing to push payday lending arrangements in Western Australia, even after Greensill promised to dump clients that have payment terms of longer than 30 days.

“We welcome Greensill’s public statement today,” said the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell.

“It is clear from media reports this week, Greensill’s statement is in relation to its dealings with contractor UGL, owned by construction firm CIMIC.”

According to documents obtained by The Australian, UGL had reportedly extended its payment terms to its small-business suppliers to 65 days from the end of the month the invoice is lodged, offering supply chain finance to those that want to be paid earlier and are willing to take a discount on the invoiced amount. 

“This is an example of clear misuse of supply chain finance as outlined in our recently released Supply Chain Financing Review. Practices such as this are harmful to small businesses, especially in the current challenging environment,” Ms Carnell said.

“As recommended in our final report on our Supply Chain Financing Review, federal legislation requiring small businesses to be paid in 30 days is the only way to drive meaningful cultural change in business payment performance across the economy.”

Last year, the Prime Minister said the government would introduce a rule requiring businesses with Commonwealth contracts to pay their suppliers within 20 days.

“That’s certainly a step in the right direction and can’t happen soon enough,” Ms Carnell said.

“In the meantime, large businesses extending or, in some cases, suspending payments to small businesses are on notice that this behaviour is unacceptable and may rule them out of future federal government contracts.”

According to Ms Carnell’s office, late payments by large businesses to small businesses account for 53 per cent of all invoices; that’s $115 billion paid late to small businesses — equivalent to $7 billion of working capital to Australian small businesses every year.

Cultural change in business payment performance is vital
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Maja Garaca Djurdjevic
Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of My Business. 

Maja has a decade-long career in journalism across finance, business and politics. Now a well-versed reporter in the SME and accounting arena, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies and enabling citizens to influence decision-making.

You can email Maja on [email protected] 

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