ASBFEO releases final report on supply chain financing review

We congratulate the Australian Small Business and Family Enterprise Ombudsman led by Kate Carnell on releasing their Final Report following their Supply Chain Financing Review.

Key Findings:

  • Kate Carnell has called for federal legislation requiring small businesses to be paid in 30 days. Rationale being 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.
  • The 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. 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.
  • It calls out several household-name businesses that have engaged in poor payment practices. A lead contractor for the majority of infrastructure projects in Greater Western Sydney, is named among other large Corporates in the report as having payment policies that are damaging to their small business suppliers e.g. requiring them to take a substantial discount in return for early payment via their supplier payables financing program.
  • 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.

These are tangible findings that will serve to enhance the viability and strengthen the financial position of Australian SME contractors.

by Scott Baker, Supply Chain Specialist, ANZ Bank