> ## Content Index
> Fetch the complete content index at: https://goodoil.news/llms.txt
> Use this file to discover other available public pages before exploring further.

# Necessary Business Reform or Just More Red Tape?
- URL: https://goodoil.news/necessary-business-reform-or-just-more-red-tape/
- Published: 2020-02-13T00:00:00.000Z
- Updated: 2020-02-12T02:22:19.000Z
- Author: Cam Slater
- Tags: AUS Politics, Business, #wp, #wp-post, #Import 2024-07-17 03:24

I had a friend, many years ago, who ran a small graphic design business. Like most small businessmen, he put in long hours and continually struggled to balance money in and money out. Everyone who’s ever run a small business knows the routine: trying to make sure invoices were paid, and usually finding that all the money’s already spent by the time you get it.

It’s a fine line to tread and when a big invoice goes missing, it can be disastrous. This is exactly what happened to my friend: a big local business ran up a huge account, then simply refused to pay. When my friend gave up begging and cajoling and finally threatened legal action, Big Moneybags just laughed. “Go ahead, I can afford better lawyers than you.”

I’m sure everyone in business has a similar story to tell. One government agency is proposing a solution. “The disease of late payments has become an epidemic,” says **Alan Kohler**. “With large companies routinely screwing small suppliers because they can.”

> Small Business Ombudsman **Kate Carnell**’s idea of standardising payment terms at 30 days for all businesses is a good one and deserves to be seriously looked at.  
>  
> The trouble is she hasn’t yet taken the next step and recommended legislation. Her draft recommendation says: “The minimum standard for all supplier payments (regardless of supplier size) should be 30 days.”  
>  
> So it should, but the only way that could be applied nationally, to all businesses, is through federal legislation, which would be a very big deal indeed – an almost unprecedented government intervention in the market. It’s implied in Carnell’s recommendation but should be explicit.

Some of Australia’s biggest businesses are already leading the way voluntarily.

> In a way Telstra and Rio Tinto have merely highlighted the problem by moving to 20-day terms themselves, in Telstra’s case for invoices up to $2 million while Rio Tinto is doing it for companies with annual turnovers up to $10 million.

However, the problem remains huge – and a massive drain on the economy.

> The supplier doesn’t have to be a very small business for there to be a power imbalance; larger companies in a competitive market can find themselves waiting 90 days for payment, with just as many problems funding the working capital as a small business\[…\]  
>  
> In her report, Carnell says late payments by large business to small business account for 53 per cent of invoices. “This means that $115 billion worth of payments to small business are late and stops $7 billion of working capital being available to small businesses every year.”  
>  
> \[…\]And what is happening with supply chain finance is an absolute scandal: big companies are routinely stretching out payments from 30 to 60 and 90 days and then offering to pay suppliers earlier in return for a discount on the invoice.  
>  
> This is little more than extortion and should be prosecuted\[…\]There is clearly a role for the ACCC to look at whether there’s a misuse of market power, and also for ASIC, in whether supply chain financing should be a regulated financial product.  
>  
> [theaustralian.com.au/business/companies/government-must-legislate-on-payment-terms/](https://www.theaustralian.com.au/business/companies/government-must-legislate-on-payment-terms/news-story/d483e7f953aa98324ce6d66586b6a378?ref=goodoil.news)

The question then becomes: is a problem that can be solved through ordinary processes? Or is legislative intervention warranted? Is this just more nanny-statism, or a necessary brake on powerful corporations distorting the free market and screwing over the little guys?

*If you enjoyed this BFD article please consider sharing it with your friends.*