In Australia, Late Payments Hit SMBs During Holiday Season

In the land down under (and of course, elsewhere, notably in the U.K.), late payments made by larger companies to small businesses (SMBs) have hit firms’ cash flows.

A recent series of statistics from Previse found that slow payments across the B2B realm cost the world economy as much as GBP250 billion (nearly $320 billion USD) annually. In the U.K., the average length of time it takes to pay an invoice is 37 days. For invoices carrying a value less than GBP10,000, processing does not begin by large buyers until about 35 days.

By sector, as reported by illion, late payments stood at roughly 13 days in the retail sector, just under 12 days in manufacturing and nearly 11 days in wholesale. As reported in Diesel, late payments loom as a significant challenge for SMBs in the Australian transport and logistics sector.

The numbers, per illion, focused on customer management solutions, show that one-third of all Australian firms (those with fewer than 500 employees) have had to grapple with late payments. In terms of the timing of late payments, the problem is worse between Christmas and New Year’s, and payments for the transport industry are late by about 9.7 days, which means it takes these firms about six weeks to get paid. Reports noted that late payments have a negative impact on cash flow, as smaller logistics and transportation firms must grapple with ongoing fuel and maintenance costs.

In further news tied to late payments in Australia, the Sydney Morning Herald reported that an ombudsman is likely to further scrutinize the use of supply chain finance, as the practice is used to pay smaller suppliers. As reported, suppliers can opt to be paid more quickly, but must often accept a discount for those timely payments.

Australia’s Labor Party has asked the Australian Competition and Consumer Commission to investigate the use of supply chain finance, because some SMBs have said that, in the words of Brendan O’Connor, shadow minister for small and family businesses, “small business suppliers invariably believe that they have no option other than to accept such situations, due to the market power imbalance between small supplier and large procurer.”

For about a year, there have been plans in place to create a national payment times register. The Sydney Morning Herald reported that the register would cover 3,000 companies, and would show the standard payment times in place when paying suppliers.

In the UK, Too

In the U.K., several construction companies have been suspended from the Prompt Payment Code, administered by the Chartered Institute of Credit Management, because they have failed to pay their suppliers in a timely manner. A total of seven firms have been suspended within that sector.

Among the companies cited are Eurovia and McNichols Construction Services, according to PBC Today. Those two firms, among others, failed to satisfy the Prompt Payment Code’s mandate that larger firms pay 95 percent of supplier invoices within 60 days.

The firms suspended from the Prompt Payment Code have been invited to produce an action plan to improve payment practices. By way of example, of the roughly three dozen firms suspended earlier in the year, 11 have been reinstated.

Moving beyond construction, other firms cited include Diageo, GlaxoSmithKline, Aberdeen Asset Management and IBM U.K.