Fleur Anderson
March 3, 2017
AFR
Supermarket giant Coles has pre-empted a government inquiry into unfair payment times for small business by promising it will pay more than 1000 smaller merchandise suppliers within 14 days.
Coles managing director John Durkan said the move was not intended to steal a march on possible recommendations to government expected this month from Small Business and Family Enterprise Ombudsman Kate Carnell, who has flagged possible penalties for late-paying big businesses.
Australia has one of the longest average payment times for small business suppliers in the world – according to a recent international study of 30,000 invoices from 80 countries – which has been called the “silent killer of modern business” for its devastating effect on new small businesses.
“We have been on this journey for quite some time,” Mr Durkan told The Australian Financial Review.
He said the move to cut Coles’ payment terms from an average of 30 days to 14 days for smaller suppliers was a natural progression from its $50 million five-year Nurture Fund of grants and interest-free loans to innovative small suppliers.
While larger suppliers generally negotiated individual payment terms directly with Coles, the new payment terms are aimed at one-third of Coles’ suppliers that provide up to $1 million of merchandise annually to the retailer.
“We understand how important cash flow is for small suppliers and shortening payment times will help to make it easier for them to run their business,” Mr Durkan said.
“Most payment terms agreed with small suppliers are currently for a longer period, but we decided to reduce them across the board for any of our smaller suppliers who were currently on more than 14 days.”
Tasmanian salad dressings and dessert toppings supplier Red Kelly is currently on a 60-day payment term with Coles and Red Kelly’s Leo Miller said the change to 14 days would make a “huge difference” to its cash flow so it could pay its own suppliers more quickly.
The change will come into effect on July 1, and over the next three months Coles said it would assist small suppliers who use paper-based invoicing to move to electronic billing.
“All they need is an internet connection and they’ll get paid,” Mr Durkan said.
Ms Carnell is due to make her recommendations to Small Business Minister Michael McCormack this month after launching the office’s first self-initiated inquiry last November.
Research by the UK-based Market Invoice found Australian businesses were being paid 26.4 days late, far later than the next latest country, Mexico, with 18.6 days, or South Africa at 16.5 days.
Ms Carnell has been considering regulatory and market-based measures – such as the recently introduced unfair contracts legislation – that make it easier for small businesses to protest against “take it or leave it” terms from bigger companies.
However, Australia’s largest companies are expected to argue against further regulation and red tape and that voluntary measures encouraging good corporate behaviour is more appropriate.
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