It’s a key recommendation made in ASBFEO’s final report regarding its Supply Chain Financing Review, released by Ms Carnell on Monday, which reflects a recent surge in larger businesses pushing out payment times to their small business suppliers.
“Large businesses extending or in some cases, suspending payments to small businesses are on notice that this behaviour is unacceptable,” Ms Carnell said.
“There’s no denying businesses of all shapes and sizes are enduring extraordinary challenges as a result of the coronavirus crisis, but small businesses are being hit hardest.”
Ms Carnell warned that many small businesses have been forced to close their doors and that many may not survive the coming months, even with significant support from the government.
“That’s why it is more important than ever to ensure small businesses are paid on time.
“We know that if small businesses are paid on time, the whole economy benefits. On the flip side, a lack of cash flow is the leading cause of insolvency,” Ms Carnell said.
“Legislation requiring SMEs to be paid in 30 days is the only way to drive meaningful cultural change in business payment performance across the economy.”
The ASBFEO’s review calls out several household-name businesses that have engaged in poor payment practices.
“MYER, David Jones, Just Group, Sussan Group, Carlton United Brewery and CIMIC are named in the report as having payment policies that are damaging to their small business suppliers,” Ms Carnell said.
“Our review has revealed the voluntary Supplier Payment Code is not effective. There is no compliance monitoring and it is actually unenforceable. This is consistent with similar systems internationally.”
She explained that when used appropriately, supply chain finance is a legitimate and effective product that can be used to free-up cash flow for small and family businesses.
“In fact, it may be particularly useful to small businesses that need to be paid faster as they navigate their way through the COVID-19 crisis. However, it is critical that harm inflicted on small businesses as a result of misuse of these products be urgently addressed,” Ms Carnell concluded.
