Big business must show leadership, respect and care for our small businesses and pay their bills on time, writes Australian Small Business and Family Enterprise Ombudsman, Bruce Billson.

We all know cash flow is king and such a vital ingredient of small business survival, particularly at these challenging and uncertain times.

So, it was really disappointing to see the latest data on payment times by big businesses to small businesses. The latest report card from the Payment Times Reporting Regulator revealed more than half of the nation’s big businesses are missing their own deadlines for paying their small business suppliers.

There’s been a marginal improvement in what they say they are going to do, but actual delivery of payment has slipped to the point where even the mediocre 30-day payment goal has not been met.

Too many big businesses fall short

Big business must show leadership, respect and care for our small businesses and pay their bills on time. And for big business leaders urging support for small business ‘doing it tough’, a practical and achievable measure is to get serious about improving payment performance to small business.

Good businesses pay. That’s a vital part of business relationships.

According to the regulator’s update:

• Only 47 per cent of big businesses paid more than 80 per cent of their suppliers by their own agreed payment deadline.
• The average contract terms for payment marginally dropped to 36.2 days, from 36.6 days.
• Only 31 per cent big businesses paid more than 80 per cent of their small business invoices within 30 days, which is the benchmark set by the Business Council of Australia.

There are some big companies that pay on time. There are even those who pay their small business customers in far fewer than 30 days. But this report tells us that far too many big businesses are falling well short of paying their bills on time.

eInvoicing can help

COVID-19 has made the problem worse. Payment disputes represent 40 per cent of requests for assistance received by our office. Prior to COVID-19, this proportion was around 25 per cent.

About one-in-four calls for assistance we receive about payment issues centre around construction businesses and 17.5 per cent were in the transport, postal and warehousing sector.

If small and family businesses are paid on time, the benefits spread through the entire economy. Let’s not forget that two out of every five people with a private sector job, work in a small business.

I’d also remind small businesses that a great way to improve payment times is to adopt eInvoicing. It enables more timely payment and cuts the administrative burden. It’s also more secure than posted or emailed invoices, so it reduces the chance of invoice fraud or scams.

About 1.2 billion invoices are exchanged in Australia every year but 20 per cent are sent to the wrong person and 30 per cent have incorrect information. It costs around $30 to process a paper invoice while an e-invoice costs less than $10.

Legislation to ban unfair contract terms moves forward

Meanwhile, some good news is the Albanese Government has moved quickly on its election promise to introduce legislation to ban unfair contract terms for small businesses.

This is another real problem for small and family businesses and it is very pleasing to see this being progressed by the Small Business Minister, Julie Collins, and the Assistant Minister for Competition, Charities and Treasury, Andrew Leigh.

The Ministers said the government would be introducing civil penalty provisions ‘outlawing the use of, and reliance on, unfair terms in standard form contracts’.

I have met with many, many small businesses who have highlighted this very problem and we see examples of unfair terms in countless contracts we review. This is an area ripe for change.

Power imbalances between small business and large enterprises are exacerbated by unfair business practices and unfair contract terms. Addressing these issues will aid in rebalancing these relationships and promote economic growth.

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