28 March 2017
2GB AFTERNOONS – INTERVIEW WITH BEN FORDHAM
Subjects: ASBFEO Payment Times Inquiry
BEN FORDHAM: Kate Carnell the Small Business Ombudsman is on the line right now. Kate, good afternoon.
KATE CARNELL: Hi Ben.
BEN FORDHAM: I know that this is nothing new but that’s no reason to not do something about it, am I right? This is something that could be addressed immediately that would have an enormous impact for small businesses around the country.
KATE CARNELL: Absolutely Ben. We all know that if you get the dollars working in the economy, in other words churning over, after you pay someone, they spend it, they invest, they employ, it gets the economy moving. This has been the case for a long time but 60 per cent of the over 3,000 people who responded to our inquiry have told us it’s getting worse and got worse even in the last 12 months. And 50 per cent of them also say that it’s large multinationals that are the worst and we’ve got a lot of examples now of large multinationals going to 120 days and then 30 days often on top of that and they’ve even had to offer vendor finance because they know by paying that slowly people’s cash flow goes down the gurgler.
BEN FORDHAM: A lot of these small businesses have been reluctant to speak out about it because they don’t have the (upper) hand in this relationship, they don’t have the power – they need that big business customer.
KATE CARNELL: That’s absolutely true and this is a situation globally that governments offshore have acted. So in the EU they’ve legislated that big business must pay small businesses. In the UK they’ve got a thing called the prompt payment policy where government has taken the lead and they’ve said that they’ll pay 80 per cent of undisputed and valid invoices within five days and the remainder within 30 days and they’re putting in place requirements for large businesses to report on how they’re performing against payment terms and times. The US has gone to 15 days for small businesses and having the same sort of requirements in big business contracts with government. A whole range of things are happening but we haven’t done anything yet in Australia and if we want jobs and growth we’re simply going to have to get payment times much much shorter than they are at the moment.
BEN FORDHAM: What are you going to be recommending when your final report comes out in a few weeks?
KATE CARNELL: We will be reporting number one: the Government takes leadership as is the case in the UK and the US and that means State Governments as well of course, they can pay quicker and they can do that immediately. We are going to suggest legislation, regulation in this space. Normally I wouldn’t do that, normally I reckon more red tape’s a pain but what these big multinationals are saying is that decisions are made at head office back in the US or Europe or somewhere and they’ve decided to go to 120 days, therefore, that’s the approach they’re going to take. So voluntary codes, all of those things won’t work unless we have some solid direction, solid legislation in Australia, they’ll continue to do it so we’ve just got to do that because if payment times continue to get longer, 120 days that’s extraordinary, no small business can manage that, we’re going to continue to see more of the same, in fact it will continue to get worse.
BEN FORDHAM: And some of these businesses spend half their time just chasing up the late payments, Kate, I know you’ve got to catch a flight; we’ll talk soon, thank you.
KATE CARNELL: Thank you very much.