PEAK small business lobby the Council of Small Business of Australia is calling for a prompt payment code to ensure big businesses pay their bills on time.
COSBOA chief executive Peter Strong insists small businesses are being left in the lurch by larger companies who stretch out payment terms.
The knock-on effect means small businesses struggle with their cashflow and to pay their own bills.
Speaking ahead of the lobby group’s pre-election statement, Mr Strong told Business Daily yesterday COSBOA was calling for all political parties to support a prompt payment code similar to that in the UK.
The UK code sets standards for payment and best practice and is administered by the Chartered Institute of Credit Management. “If people don’t pay on time it has a domino effect and it is particularly bad for small businesses,” Mr Strong said.
He said the supermarket monopolies often meant that smaller producers had little alternative but to cop a long wait for payment.
“Due to the uneven power in the relationships, often a small business will have to put up with it. There is a dominance of a small number of big players which makes it difficult for small businesses to seek alternative markets for their goods and services,” he said.
Damian Arena, the managing director of payment automation software maker IODM, said research showed there was around $26 billion of unpaid invoices at any point of time in Australia.
“That’s $13,200 for each small business,” Mr Arena said. “It’s the fundamental issue for small and medium enterprises and it’s worse, growing at an estimated 3 per cent annually.”
IODM has a scheduling process in which a reminder is issued seven, 14, 21 and 28 days after an invoice is issued.
After 28 days it can automatically refer an outstanding invoice to a debt collection agency.
Mr Arena said it was preferable to have cash off the balance sheet and in the bank.
He said research from the Commonwealth Bank last year estimated businesses spent as much as 1.8 million hours chasing outstanding debts.
Mr Arena said often businesses did not realise they had a problem and just accepted payment for invoices bumping out from 60 to 90 days.
Even if they found the time, they chased bigger debts and left many more smaller debts.
He said IODM just provided an automated process so businesses were not manually sending out reminders or phoning to chase bills.
“Often the squeaky wheel gets the oil,” he said.