The payment practices of large businesses and governments are in the spotlight with the Small Business and Family Enterprise Ombudsman's Payment Times and Practices Inquiry now underway.
The Ombudsman, Kate Carnell, says the inquiry is aimed at preventing patterns of behaviour that undermine the financial viability of small businesses.
The self-initiated inquiry will be led by Carnell, in partnership with state-based small business commissioners in New South Wales, Victoria, South Australia and Western Australia.
“Anecdotally, small businesses are reporting that some large businesses are taking longer than ever to pay their bills; this Inquiry aims to establish an accurate picture of the trends that have emerged in recent years surrounding the commercial arrangements between large and small businesses, as well as governments and small enterprises,” a statement from the Ombudsman’s office said.
According to the Ombudsman, the Inquiry will assess the impact of late payments on small businesses, and identify solutions that can be implemented quickly and effectively.
“Cash flow is king to small business; late payments can be the difference between success and insolvency so it’s vital these sorts of unfair payment practices are stamped-out to ensure small businesses can reach their full potential, and in doing so, continue to contribute substantially to the overall health of the national economy,” the statement said.
The final report of the Inquiry, which will seek input from business and stakeholders through submissions, an online survey and public consultations, is expected in March 2017.
MYOB CEO, Tim Reed, has welcomed the inquiry, noting late payments are an ongoing pain point for SMEs.
He points to recent MYOB research that found 77% of SMEs were impacted by customers not paying their bills on time. The company’s SME Snapshot also revealed the effects of late payment include impacting business owners’ personal finances (35%) and the ability to cover expenses such as rent and power (32%), while 52% said it impacts their stress and anxiety levels.
“It’s clear we need to do more to support our SMEs and give them a fair go in business,” says Reed. “SMEs shouldn’t be stymied by larger organisations not playing ball.”
Reed highlights the research found 72% of small business owners are in favour of introducing a voluntary code to encourage businesses to pay more promptly.
“Given the overwhelming support for this initiative, it would be a positive move to see the government and big businesses to put forward an initiative to implement a national prompt payment protocol to ensure small businesses are not being delayed payments by other businesses.”