ASBFEO Calls For Supply Chain Financing Fairness

A position paper released by Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), calls for a fairer approach to supply chain financing.

The ombudsman’s Supply Chain Finance Review released on Friday (Feb. 7) outlines draft recommendations about supply chain financing that will be completed for the final report in March.

Carnell said the draft findings and recommendations call for fair payment terms and controls. She said numerous bigger companies had abused the tool, and the supplier payment code is unenforceable.

“Supply chain finance is a legitimate and effective tool that can be used to free-up cash flow for small and family businesses,” Carnell said in the position paper.

“However our Review has found that too many big businesses have extended payment times and then offered supply chain finance. This practice severely impacts small business suppliers and is totally unacceptable,” she said.

“There are too many small businesses that have to wait too long to get paid. This is in part because the definition of small business is wide open to manipulation under the Supplier Payment Code,” she said in the paper.

She also pointed to the definition of a small business as being a “major blockage.” and a unified approach would be beneficial to small businesses.

Following the release of the position paper, Greensill Capital announced it would no longer offer supply chain finance services to large firms that have unfair payment terms.

Global financier Lex Greensill has said he will drop supply chain finance clients with payment terms beyond 30 days.

Greensill’s stand prompted CIMIC — Australia’s biggest construction company and a Greensill client — to rethink its 65-day payment terms. The company increased the terms from 45 to 65 days in September while also launching a payday-lending scheme through Greensill.

In October, the SoftBank Vision Fund invested an additional $655 million in supply chain financing firm Greensill, just months after contributing an $800 million investment in an earlier funding round.