In Australia, Late Payments Under Govt Microscope

B2B late payments

Australia’s federal Labor Party has issued calls to scrutinize late payment practices that it has said are “unfair” to small and mid-sized firms. Separately, a study of the construction industry finds that a majority of subcontractors would offer discounts, if they could be assured of being paid in a timely manner by contractors and other customers.

In Australia, scrutiny of late payments is deepening. As reported this past week, the country’s federal Labor Party issued a statement that it has brought complaints about lengthening payment terms to the Australian Competition and Consumer Commission (ACCC).

As reported by My Business, the statement noted that the ACCC has begun investigating the extended payment times and “reverse factoring” that have impacted small businesses (SMBs) in the country, and that a number of SMBs have complained about those practices. The statement was signed jointly by Shadow Minister for Small and Family Business Brendan O’Connor, Shadow Assistant Treasurer Stephen Jones and Shadow Minister Assisting for Small and Family Business Matt Keogh.

The statement said, “The ACCC investigation was prompted by correspondence from federal Labor, following a number of serious concerns raised by small business suppliers, including through our Small Business Listening Tour. Labor has long maintained concerns about large businesses extending payment times to small business suppliers — sometimes as long as 90 days after invoicing. We are particularly concerned about the increasing prevalence of ‘reverse factoring’ — where payment times are extended, and small businesses are offered a third-party financier to pay the invoice on time, but with a fee, meaning small businesses aren’t receiving full reimbursement.”

The party has maintained that smaller firms are afraid of reprisal, should they go public with the way they’ve been treated by larger firms. The officials have called on the government to take action against those payment practices. One suggestion has been that a market study be conducted.

As reported, data from illion shows that late payments in the country stand at an average of just more than 10 days

Drilling Down Into Construction

Separately, in the construction industry, Rabbet — which makes finance software for that vertical — released its 2019 Construction Payments Report this week, finding that 72 percent of subcontractors would offer payment discounts to be paid within 30 days — a practice that would save the industry $44 billion.

Cash flow issues tied to “floating” payments to staff and other activities add more than 5 percent to project costs. In addition, 30 percent of respondents said that work has been delayed, or even discontinued, in the wake of late payments to their own staff. As much as 63 percent of respondents said subcontractors chose not to bid on certain projects due to the reputation that contractors may have had in terms of late payments. Roughly 43 percent of subcontractors wait between 30 days to 60 days for payments, and 30 percent wait more than 60 days.

In terms of individual company announcements, Barclaycard Commercial Payments has launched an online hub, Precisionpay Hub, designed to streamline payments in the U.K. Timely payments, the firm said, has been an area of concern for the buyer/supplier relationship.

Timely payments happen only 73 percent of the time, as measured on average. More than 60 percent of more than 500 senior managers in the U.K. said they are “more concerned” by timely payments than they were even five years ago, noted the survey. The company said that Precisionpay Hub sets up a platform where buyers and suppliers can interact, agree on payment terms and transact, which reduces days sales outstanding.