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16 November 2016



Subject: ASBFEO Payment Times and Practices Inquiry.

Robbie Buck: Do you work in small business?  Have you worked in small business in the past and have you ever had trouble getting paid?  I’m sure if the answer to the first one is yes the answer to the second is definitely yes.

Do you find yourself waiting on payments and do you have to spend time chasing up invoices?  We’re being told that here in Australia we are particularly bad when it comes to the late paying of invoices and the Small Business Ombudsman has called the phenomenon ‘a silent killer of modern business’.  The Ombudsman is Kate Carnell and she joins us this morning, good morning.

Kate Carnell: Hi Robbie.

Robbie Buck: Yeah, how bad are we in Australia?

Kate Carnell: Look, we’re right at the bottom of the heap really.  There was a recent international study – the first of its kind – that looked across a range of countries – the OECD and some other countries as well – and there was Australia right at the bottom below Mexico and South Africa and other places.

At the top were countries like Japan, some of the Scandinavian countries, and so on, so we’ve got to do better because 90 per cent of small businesses that go to the wall, it’s because of cash flow, and often that’s not a lack of customers, it’s the fact their customers aren’t paying them on time.  And remember, as a small business person, you’ve got to pay your staff, you’ve got to pay your landlord, you’ve got to pay the ATO, you’ve got to pay your suppliers, so if your company’s customers – particularly the big guys – don’t pay you on time, you’ve got a cash flow problem and that can lead to all sorts of dire consequences.

Robbie Buck: Yeah, what is interesting about this is that the worst offenders are the bigger companies, and even sometimes governments.

Kate Carnell: Look, that’s true and the fascinating bit, of recent years, what’s happened is payments times on average have come down – they’ve got quicker – and I think that’s because probably these days we get invoices by email and we go online and we pay them, so it’s a quicker process.  So that’s the small to medium-sized businesses paying each other quicker, but the bigger businesses – businesses with more than 200 employees – seem to be using their market power, to pay slower because they can you know; it’s not like you have a lot of choice if you’re a small business person.

Robbie Buck: And they’re doing that because they can then use the money for whatever they want to use it for, for longer, and obviously incrementally, the more of those situations you have, it really helps their bottom line.

Kate Carnell: It does, but those are the companies that’ve got a capacity to pay quicker.  And yes, they’re doing it because they can, they’re using small business people fundamentally as banks I suppose – very cheap banks – and we just think that’s not acceptable; it’s impacting upon on our economy, so we’ve launched today an inquiry into this.

We want to find out really what’s happening; who are the culprits; what we can do about it.  There are some good examples around the world of countries – places like the EU – that actually have either had compulsory codes, legislation, codes of practice more broadly, to address this issue.

But first of all we want to find out what’s really happening out there in the marketplace; we’ve got a website where small businesses can go: the Australian Small Business and Family Enterprise Ombudsman, yes it’s a mouthful…

Robbie Buck: Yes it is, isn’t it?

Kate Carnell: …it is horrible – it’s the worst name in the universe but there you go, that’s what the legislation says the name is so I don’t have a choice really – and tell us their story; I don’t want long submissions, I just want them to tell us what is happening to them.

Robbie Buck: Some examples, yeah.  Well, here’s a couple for you this morning; John’s in Beacon Hill, morning John.

Caller: G’day Robbie, how are you going?

Robbie Buck: You are a small business owner?

Caller: Yes, for the last 22 years in publicity and publishing, and what Kate Carnell said is absolutely true; the bigger companies actually use their market power, they string you out; the uncertainty of when they are going to pay you; you might invoice on the 29th of the month but they’ll lose it – in inverted commas – for a few days until it rolls over into the next month, and then they say, ‘it’s 30 days from the end of that month’.

Robbie Buck: Okay and there’s no…

Caller: Media buying agencies are probably the worst; they pay 45 days and then they string it out and again they’ll let it roll into the next month and then they go ‘it’s actually 75 days’.  And you don’t know; you can’t sort of keep testing them, you ring them up and they say, ‘it gets paid when it gets paid; you’re on 45 days and that’s that’.  So you’ve got no certainty of actually when it’s going to arrive in your bank account.

Robbie Buck: And I take it Kate, that the recourse for people like John is pretty small at this stage.

Kate Carnell: It is pretty small because, again, you can’t afford not to deal with these people.  That’s the thing that is really wrong about this; it’s big companies using their market power to really screw little guys, and that’s not in anyone’s best interests.  All sides of politics rightly say that small business is the engine room of our economy, but the engine room can’t work very well without petrol and that’s cash flow.

Robbie Buck: Yeah.  Nicola is from Maroubra, hello Nicola.

Caller: Hi Robbie.

Robbie Buck: This resonates with you?

Caller: It does, very much so. We’ve had a small business for about 17 years now and we do mainly residential work, purely because we can’t, the governments just don’t pay.

Robbie Buck: So these are government agencies are they that aren’t paying?

Caller: Yeah, government agencies, just mainly schools, local councils things like that.  We’ve had experience with them. I mean, they do pay…

Robbie Buck: It just takes a long time.

Caller: It takes a long time for them to get the payment through.

Robbie Buck: Yeah.

Caller: So we end up with residential projects because basically the smaller residential projects are the people who pay.  We pay our staff weekly.

Robbie Buck: That is a real surprise Kate isn’t it because we hear from governments all the time about how we need productivity in our business and how supportive they are of small businesses, but you then have this side of the story which is putting a lot of pressure on small businesses.

Kate Carnell: Well it’s absolutely unacceptable, let’s be fair, and we’ll be focusing on governments. You know, there is a couple of states in the US I think that have taken a really smart approach.  They said, ‘look things are tight, budgets are tight, but one thing we can do to stimulate small business is to pay in 15 days’.  So, just by governments speeding up their payment times, it can make a huge difference to the economy more broadly; wouldn’t that be a good idea?

Robbie Buck: Yes, that would be a simple idea.

Kate Carnell: It would be a simple idea.

Robbie Buck: Yeah alright, give us that pithy little website again for people who would like to…

Kate Carnell: It’s Australian Small Business and Family Enterprise Ombudsman,  It’s easy once you get on the site, once you’ve found the name.

Robbie Buck: We might just put your name and Small Business Ombudsman into a search engine and you can find it.

Kate Carnell: That will work.

Robbie Buck: Hey Kate, good luck with it, thanks for chatting to us this morning.

Kate Carnell: Thanks Robbie.

Robbie Buck: Kate Carnell is this Small Business Ombudsman and this push this morning to try and change the culture here in Australia; we’re below Mexico and below South Africa when it comes to payment times and as you heard, the bigger companies and the governments and government agencies happen to be the worst payers I guess, what are the solutions?  Kate is looking at potential regulatory, market-based measures.  Is that the answer do you think?  If you’ve got your own examples to share with her maybe jump on the website for that one as well.