ASBFEO warns 'small business definition open to manipulation'
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has warned that the definition of small business is wide open to manipulation under the Supplier Payment Code, and has called on the government to rectify the issue.
The position paper details ASBFEO’s findings and makes a suite of draft recommendations to be finalised before a full report is handed down at the end of March.
Ms Carnell pointed out that while supply chain finance is a legitimate and effective tool that can be used to free-up cash flow for small and family businesses, it is being largely misused by big business.
"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," said Ms Carnell.
She explained that the definition of small business leaves room for mistreatment and manipulation, and called on the government to rectify the problem.
“A key finding in our position paper is the definition of a small business continues to be a major blockage, and a unified approach would be beneficial to small businesses," said Ms Carnell.
“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."
Putting aside the the issue of manipulation, Ms Carnell also noted that given that the Supplier Payment Code is voluntary there is no compliance monitoring.
"It’s actually unenforceable," she argued, suggesting that it should be replaced with the Payment Times Reporting Framework, which would be enforced by an appropriately funded and proactive entity.
“The fact is that all businesses, regardless of their size should be paid in 30 days and supply chain finance should be available to those small businesses that want to be paid faster," concluded Ms Carnell.
“Rates should be set across markets and not through the use of technology aimed at targeting and squeezing small business suppliers, including those already in distress."
The ASBFEO conducted a wide-ranging consultation process with large businesses, small business and supply chain finance providers since launching the review.