Australian Small Business and Family Enterprise Ombudsman Bruce Billson extract of interview with Rita Panahi.
Subject: Payment Times
One of the hardest hit sectors in the past few years has undoubtedly been small business, and with inflation and cost of living pressures, things haven't got much easier for those people in the small business sector. There are calls now for big businesses to play its part and do what it can to ease that pressure. With recent figures showing that only three out of ten big businesses are paying their small business customers within 30 days.
Joining me now is Australian Small Business and Family Enterprise Ombudsman, Bruce Billson. Bruce, thank you so much for your time. Who are the worst performers here? That's a pretty poor record. Only three out of ten.
It's not great at all, Rita. It gets worse, actually. There's a quarter of big businesses who pay their small businesses in over 120 days. Now you can imagine if you and I were running a small or family business really with cashflow challenged, those price pressures that you alluded to and, you know, a little bit of steam coming out of opportunities for growth and profitability, not to get paid in a timely way for work you've already delivered, that's just terrible. And when I look at these performance statistics, it reminds me of John McEnroe after a bad line call. You can't be serious. So, I'm urging big business to do the right thing, play its part, make a contribution for its small and family business suppliers, and lift their game in terms of payment performance.
What can we do to encourage this good behaviour? Could we be having a naming and shaming campaign, perhaps, and naming some of these big businesses, multinationals who are taking 120 days to pay the little guys? And as you say, that's causing significant harm to just ordinary people trying to run a small business.
Manufacturing, construction, retail. That's the areas where the performance is at its poorest. But the previous government introduced a Payment Times Reporting Register so there's about 7000 of our largest businesses that have got turnovers over $100 million that report every quarter on not just the terms that they're offering, but then their actual payment performance. That transparency, Rita, was supposed to have brought about change, supposed to have let the laggards that are doing the wrong thing be seen, and those, frankly, that are doing the right thing to get the positive glow for doing so.
It seems not to have done that. There's been three quarters of reporting received to date by the Register and things haven't got any better at all. And I think some of it's because the Register is really hard to penetrate. You don't get a league ladder, you don't get a clear line of sight about who's doing well and who's not. And I think that's why at the moment a review is being conducted of the Register just to see whether it can be recalibrated and have that effect that you are describing of name and shame for the poor ones but also show showcase the exemplars, you know during COVID some of our biggest companies were paying their small and family and indigenous businesses in a handful of days. The question is if that's capable, why not do it? If the ability is there, where's the appetite and what can we do to build that appetite, so we get better payment performance?
And what's the impact of these delayed payments? Are we seeing people miss their mortgage payments? Are we seeing the small businesses not able to pay their providers? What sort of impact is it having across the board?
Yeah, that's the squeeze Rita. You've nailed it completely. I mean, there are already cost pressures in small businesses. We've seen really substantial rent increases, many of them pegged to inflation. And as we've seen, inflation higher than many business owners have been familiar with. That's a pressure point. Energy costs, another pressure point. If you're a borrower of money as a small business, you know, six and a half per cent you're doing well, but those rates are going up.
And let's not forget half of all small business loans are secured by personal assets - overwhelmingly the family homes. So, there's real pressure there as a family leader and a business leader where you can't actually get the revenue into your business for work you've already performed.
Rita, imagine you and I were putting in an electrical substation in regional Victoria. The contract might be worth $150,000, $120,000 of that may be for the transformer, the substation. We've paid that as a business. We're now doing our value add by installing it. The person that supplied us the equipment, they’re wanting to be paid. So, the pressure's on. Yet, we're not getting paid from actually installing the equipment. So, that's the pressure that's adding to many headwinds that small businesses are facing right now.
Bruce Billson, thank you so much for joining me this evening.