open side menu Navigation

05 April 2017



Subject: ASBFEO Payment Times and Practices Inquiry.

ROBBIE BUCK: The Small Business and Family Enterprise Ombudsman Kate Carnell joins me this morning. Good morning.


ROBBIE BUCK: It’s a pretty strong word [extortion] obviously.

KATE CARNELL: It is a strong word but cash flow is king for small to medium businesses and it’s not only just really little businesses but medium sized businesses as well.  Without cash flow you can’t pay your staff, you can’t pay your landlord, you can’t pay your suppliers and let’s be fair; you go broke.  In fact something like 90 per cent of small businesses that go to the wall it’s because of cash flow and in many cases it’s simply because the big guys are choosing to pay the smaller businesses – the businesses that really have no choice whether to deal with those bug guys, they’re such a big part of the economy it’s hard to say “well they don’t pay quickly enough so I won’t deal with them” and increasingly these multinational companies have in their contracts that their payment times are 120 days.

ROBBIE BUCK: Obviously they can afford to pay – this is a tactic that they’re using.

KATE CARNELL: These are billion dollar companies Robbie.  They’re global, they’re billion dollar companies, they’ve just found that it is a cheap way to get capital that they can then use globally for hedging purposes all sorts of things and it’s fundamentally an interest free loan from Australian small to medium businesses.  That’s not acceptable and it gets in the way of a growing economy.  You can’t grow your businesses if people aren’t paying you and you don’t have the money to invest or to employ so this affects all of us.

ROBBIE BUCK: I know that some people are more conspiratorial about this in suggesting that there are moves by some companies to try and clear out some of the smaller companies by this behaviour.  Is there any truth to that?  

KATE CARNELL: I can’t make a comment on whether that’s the case, all I know is increasingly multinational global companies are moving to 120 days as their standard payment times.  Some of them – in fact one of them told me that they were doing really well because they were only at 60 days.  It’s still far far too long.  So we’re seeing it as a method of improving their bottom line, making sure they’ve got cash to do whatever they want  to do globally at the expense of small businesses and the point you made blew me away when initially just one company told us that they had been offered a loan by one of these companies at a couple of basis points below the market rates, so the big company was saying they were doing these guys a favour – the only reason they needed  the loan is because the big guys hadn’t paid them.  Then we found a whole range of other companies, even some middle sized companies who were telling us exactly the same stories.  Quite seriously that means that the big guys know that their payment terms are impacting upon the business of these guys otherwise they wouldn’t have these loans on offer.

ROBBIE BUCK: What are the motivations for these larger companies to want to loan the smaller businesses money, what’s in it for them?

KATE CARNELL: It’s not them doing the loans I’m told, it’s in partnerships with banks because they’re large multinationals they get a slightly lower interest rate then these small businesses would and so they’re using their size to be able to offer these smaller businesses a loan at a slightly better rate then they would have been able to get themselves, which is how it works.  But they wouldn’t have needed the loan…

ROBBIE BUCK: If they were getting paid in the first place. 

KATE CARNELL: And therein lies the problem.  The issue here though is it’s getting worse and the big companies involved tell us that “it’s not our problem, decisions are made in head office back in Europe or the States, we’ll comply with the law of the land if there was a law in Australia that says this wasn’t a reasonable approach we’d comply but otherwise…”

ROBBIE BUCK: We’ll do what we want.  Kate Carnell is with us this morning, the Small Business and Family Enterprise Ombudsman and I wonder if these stories are resonating with you if you are somebody who runs a small or a medium sized business and has had lots of problems getting paid in time and whether it is in fact it’s getting worse.  There’s a text this morning 0467 922 702 this is from Dave; “I work with SME’s and Government and blue chip companies and the Government and the blue chips are the worst – you take the terms or you don’t get the work, it sucks.  The Government needs to bring in laws if they don’t pay say in seven days then they get fined”.  So this really is coming back to legislation, is this what you’re calling for?

KATE CARNELL: When I started this inquiry – we’ve had 3,000 submissions from businesses which is a huge number because businesses often don’t have time to do that sort of stuff, which shows that it’s a really big issue.  When we started I thought that maybe a code of conduct would work but as we’ve progressed and as we’ve spoken to some of these big companies it really does appear that unless there’s actually a law involved or a regulation they’ll continue to say “decisions are made in head office, nothing to do with us”.

ROBBIE BUCK: They’ll just do what they want, a big issue.  Hey Kate thanks so much for your time this morning.

KATE CARNELL: Thanks Robbie.