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Telstra on late payments to small businesses

Telstra office, Canberra

Telstra and Rio Tinto move to 20 day payment terms for small businesses

Only a few big businesses, such as Telstra and Rio Tinto, have done ‘the right thing’ according to Australian Small Business Ombudsman Kate Carnell, in terms of addressing late payments.

Late payments is a huge problem for the Australian small business community, with a Xero report last June (2019) citing a loss of $7 billion per year to small business caused by consequential cashflow issues.

Xero Managing Director, Trent Innes, called on big business and government ‘to prioritise this issue’ after the report was released, but it seems that this hasn’t been the case.

In September 2019, at Xerocon Brisbane, we interviewed Trent Innes regarding the biggest challenges to small businesses and the mistakes they are making. He answered with “payment times” and delved into the economic impact of this.

Mr Innes said,“At any one time there is around $115million outstanding between small business and big business that’s overdue.”

He added, “There’s a lot of things small businesses can do to help themselves in this. One is to bring payment terms down, so bring them right down – with less flexibility.”

Telstra and Rio Tinto move to 20 day payment terms for small businesses
Trent Innes, Managing Director, Xero Australia

However, is this problem truly lying with small business, or is big business to blame? Or more likely, is it a combination of both?

Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), believes responsibility lies within big businesses, saying “In the past week, Telstra and Rio Tinto have moved to 20-day payment terms for SMEs and there is no reason why other big businesses can’t do the same.”

She has said that she will recommend federal legislation if nothing changes; this would mean all small businesses would be paid in 30 days under law.

“Australia’s big businesses have had more than enough chances to do the right thing, so if they can’t follow Telstra and Rio’s lead, I will have no choice but to recommend legislation requiring 30 day payment terms across the board.”

In the same Xero report, it was revealed that 53% of all invoices in Australia are from small businesses to large businesses. With cashflow so critical for small businesses to survive, it’s easy to see how large the scale of the late payment problem is, and the impact on the economy.

Ms Carnell said, “The economic case for faster payment times is clear, not just in Australia but internationally. When the Obama administration moved to 15 day payment times, a Harvard Business School study found that created 75,000 jobs and delivered an additional $6 billion to US workers’ pay packets.

Australian Small Business Ombudsman, Kate Carnell
Small Business Ombudsman, Kate Carnell

“The fact is that all businesses, regardless of their size should be paid in 30 days and supply chain finance should be available to those small businesses that want to be paid faster.”

Angus Capel, Small Business Advocate at Xero Australia, said that any legislsation would be welcomed by him, as the case for faster payments terms is ‘strong.’

“For too long, small businesses have carried the burden of big businesses not being able to pay invoices on time,” he said.

Hampering cash flow and growth opportunities, late payments can be extremely damaging to small business. Find out what you can do to help protect against late payments here.

Related: The underrated benefits of the new e-invoicing hype

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Loren Webb

Loren Webb

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