Stating that small business subcontractors are vulnerable to delayed payments, the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell has announced she is examining payment terms and conditions for “subbies” working on government projects.
“Most government departments pay their invoices within 30 days, but when a prime contractor is appointed to manage a project there are regularly delayed payments further down the chain,” she said.
“Government agencies and prime contractors should ensure that payment terms and conditions throughout the supply chain are no worse than those in the head contract. It’s not good enough to leave responsibility with a head contractor and overlook small businesses who do much of the work.”
Carnell reiterated that cashflow is vital to small business success
“Cashflow is king,” she said. “A lack of cashflow is the leading cause of business insolvency and this underscores the importance of prompt payments.”
Carnell said she has written to seven government departments seeking information about their procurement and payment policies. It follows her inquiry into payment times, which recommended the government pay invoices within 15 days.
The inquiry recommended the Australian Government:
- require its head contractors to adopt the payment times and practices of the procurement policy through the supply chain;
- extend its payment policies to all agencies and entities;
- publish its payment times and policies, and for all its agencies and entities, with performance against best practice benchmarks;
- procure from businesses which have supply-chain payment times and practices equal to or better than its practices.
The inquiry also recommended that all levels of government adopt the same prompt-payment policies.
Related: Let’s Talk… Late Payments and Small businesses being used as ‘cheap form of finance’ by larger ones: late payment inquiry.