Responding to a story on the slowest-paying industries, the anonymous My Business reader made the following suggestion:
“The [government] should implement a system where B2B[s] enter a registered supply agreement and it’s enforced when payments are not made within [the agreed] terms.
“That [way,] a business just can’t change suppliers without paying the first supplier.”
The reader added: “This would save a lot of heartache for everyone and flag insolvent businesses well before they nearly take everyone down with them.”
Idea not without precedent
Peter Strong, CEO of the Council of Small Business Organisations Australia (COSBOA), said that this is something already in the pipeline for the construction industry and to do with government tendering, to make sure that anyone tendering for government contracts has a good history of paying their sub-contractors and suppliers on time — as was recently announced by Prime Minister Scott Morrison.
But the COSBOA CEO told My Business that, while he can understand the reasoning behind the idea of registering all business supply agreements, in practice it risks becoming more of a hindrance than a help to SMEs.
“I can see why, but it’s red tape and that’s the problem with it: it will become a red tape issue. But it’s a good idea,” the CEO said.
Other policies and processes already being worked on may also help to provide greater transparency for SMEs, said Mr Strong.
“In the e-invoicing area… there are a range of things happening there that may be able to create more transparency around [this]. And the combining of ASIC registers might also somehow in the future give an opportunity to do that,” the CEO said.
Mr Strong added that any information being uploaded to a public register of supply agreements would need to be vetted for accuracy.
He gave the example of one small business not paying another small business, but the issue fundamentally stemmed from delayed or non-payment by a third business along the supply chain.
“So we need to make sure the information on there is actually clarified,” Mr Strong said.