Half of Australia’s Big Businesses Failing to Pay Small Suppliers on Time

A general view of Bankwest Stadium under construction during a Western Sydney Wanderers A-League media opportunity at Bankwest Stadium in Sydney, Australia, on Feb. 25, 2019. (Matt King/Getty Images)

Around half of Australia’s big businesses are failing to pay small business suppliers on time, according to the country’s small business and family enterprise ombudsman.

According to the Payment Times Reporting Regulator, just under of half the country’s businesses with an annual turnover of over $100 million (US$70 million) managed to meet payment deadlines to 80 percent of their supplier invoices.

“This is an incredibly disappointing result,” Ombudsman Bruce Billson said in a media release. “I call on the nation’s big business to show leadership, respect, and care for our small businesses and to pay their bills on time.”

“Small businesses are not asking to be paid early, just to be paid on time. Put simply, good business pays.”

Only 31 percent of big businesses paid more than 80 percent of their small business invoices within 30 days, a benchmark set by the Business Council of Australia.

Billson said the 30-day benchmark was “mediocre” to begin with and stressed the need for the business community to get serious about it.

“Those exemplars deserve to be acknowledged for that better practice that they’re leading. But we just need the broader business community to get the simple message—good business pays,” he told ABC radio.

“Delaying the timely payment of your small business supplies serves no good and just puts pressure on other parts of the economy when cashflow is really critical for those smaller enterprises.”

Adopting eInvoicing was suggested as a way to improve payment times, as it cut administration time and was “more secure than posted or emailed invoices”—reducing the chance of invoice fraud.

Affected by the Pandemic

Billson said situation had been worsened during COVID-19, with payment disputes now representing 40 percent of requests for assistance to his office, up from 25 percent prior to the pandemic.

Around one quarter of requests came from the construction industry, which has experienced supply chain challenges.

Small business owners were hit hardest by the pandemic and staff shortages caused by COVID-19 restrictions, with Billson saying they should not be further disadvantaged by not being paid.

Funding solutions advisor Optipay also found that businesses overall were taking longer to settle invoices, putting pressure on cashflow for small and medium enterprises.

Its own research found that over the last six months, the average number of days invoices remain outstanding has increased from 31 to 38 days.

“This slowdown in payments is having a knock-on effect down the whole supply chain across just about all industries,” OptiPay CEO Angus Sedgwick said.

Sedgwick noted that after the Australian Taxation Office resumed tax debt collection, which was put on hold during COVID-19, many businesses were “suddenly realising” their cashflow options are now limited.

“Banks are tightening their lending and there are no more government handouts, so unfortunately, pain is on the way for many SMEs,” he said.