Power imbalance: data reveals “woeful” payment times by large retailers

arm and cash flow challenges for small and family businesses.” According to data analysed by ASBFEO of 7,000 big businesses collected by the federal government’s Payment Times Reporting Regulator, only 24 per cent of big businesses in the retail sector are paying its small business customers within 30 days. Many of these businesses recorded annual turnover of over $100 million.  About 14 per cent of big retailers take more than four months to pay their small business suppliers. Moreover, about eight per cent take between 61-90 days to pay, while 54 per cent take between four and eight weeks. Only nine percent pay their bills in less than 20 days. This, despite a push from the Business Council of Australia for big businesses to pay small businesses within 30 days. Managing director at Spenda, a B2B payments solution company, Adrian Floate said that larger businesses should take more responsibility to pay in an appropriate time frame, and improve conditions for smaller players. Not paying on time has the effect of perpetuating late payments and cash flow challenges across the economy. Billson said that big retailers can surely do better than their current performance. He added that small and family businesses have kept their side of the deal by providing goods and services, so big businesses should do the right thing and pay their bills in a timely fashion. “A vast number of big businesses just aren’t meeting the mark and it’s causing needless harm and cash flow challenges for small and family businesses who are waiting too long to have their invoices paid,” he said. “At a time when small and family businesses are facing headwinds, big business can play their part. [Delaying] the timely payment of small business suppliers just puts pressure on other parts of the economy when cash flow is critical for those smaller enterprises.” Billson welcomed the government review of the Payment Times Reporting Act which is looking at ways to improve payment times and terms for small businesses, and will consider the introduction of mandatory payment times. Further, the Payment Times Reporting Scheme, which took effect in January 2021, requires businesses and government enterprises with total annual income of over $100 million to publicly report payment times to small suppliers. This was introduced as a mechanism to increase transparency, and improve payment performance. An Australian Competition and Consumer Commission (ACCC) spokesperson told Inside Retail that late payments by larger businesses to small business suppliers or retailers, in specific circumstances, might contravene the Australian Consumer Law. “The ACCC continues to work closely with the Australian Small Business and Family Enterprise Ombudsman in relation to allegations or concerns raised by small businesses about their dealings with larger business customers or suppliers,” the spokesperson said. Informal debt collector Stuart Horrex is the co-founder of ArtSHINEshowcase.com, a boutique wholesaler and supplier of art inspired homeware and giftware products. Even after negotiating favourable terms like 90-day payment times, Horrex explained that he faces issues around late payments. As a result, he has to spend time, energy and money to chase the retailers it supplies to, who might then seek to renegotiate payment terms at a late stage. “We reach the end of the 90 day terms, and we then have to chase outstanding invoices. We get offered part payments, and options for instalment payments. [Cash] flow seems to come up [as a justification] as well as the current trading conditions,” he said. Horrex has operated multiple retail sites in the past, so he said he understood the challenges that retailers face. As a supplier, he endeavours to negotiate and be flexible with payment terms, because he wants all parties to be in a good position, and also wants to see the brand’s products on shelves. But, he said that it’s challenging when other parties seek to change terms after agreements have been made. “It creates a flow on effect,” he said. “Those retailers have cash flow challenges, [and] they don’t pay when [payment is] due. That affects our cash flow, and the cycle continues,” he said.  “Instead of focusing on the core of what your business is all about, you become an informal debt collector.” He believes there’s a power imbalance between big retailers and smaller suppliers, who don’t have the capacity to hire legal or collection departments. Horrex added that he is keen to work closely with the business it supplies to, and he has always managed to find a resolution to late payments. “We haven’t had to resort to next steps,” he said. Under great pressure Australian Retailers Association (ARA) chief industry affairs officer Fleur Brown told Inside Retail that late payments remain as an issue for small businesses in all industries across Australia. She said that the importance of prompt and timely payments will only increase as these smaller retailers and suppliers, who might already be struggling with cash flow challenges, feel the pinch of tumultuous economic conditions. She noted that businesses have been under great pressure in the past three years, which can lead to a chain reaction in terms of payment times. “The company may be waiting for payment from its own customers in order to pay suppliers, [or] there could be an ongoing dispute between the business and supplier,” Brown said. Floate added that many small retail businesses aren’t at the size or scale to manage its cash flow for more than a month or two in advance. As such, it may feel the cash flow crunch because of late payments. He believes that large businesses hold a lot of the power over smaller businesses when it comes to payments, and are often slowest at paying its suppliers – primarily because they can pay late, and because smaller businesses have limited bargaining power. He explained that late payments are likely behind Australia’s position as one of the largest trade credit users in APAC, with 71 per cent of B2B transactions occurring through trade credit. “These larger players will hold onto cash for as long as possible, mainly to benefit their own cash flow, but the sad reality is that slow payments can prevent smaller companies from making investments in research, new employees, better equipment upgrades, and other necessary growth initiatives,” he said. Next steps So, what can these smaller retailers and businesses do if they haven’t been paid on time? According to Floate, small businesses have limited control over their large trading partners, and government schemes alone won’t solve its cash flow problems. He believes that businesses should invest in the right technology, and technology partners, which can assist in streamlining and automating its invoice management process. Meanwhile, Brown encourages small businesses and suppliers who haven’t been paid on time to stay in close communication with the party concerned.   She added that payment times are audited by the government’s Payment Times Reporting Scheme, so habitually late payments are recorded. “Further action can include seeking advice from their small business ombudsman or ultimately notify credit companies which could result in reputational damage,” she said. “In these challenging times, many businesses also may want to review their terms and conditions for payment – including applying incentives and penalties for early or late payment.” According to Billson, small businesses should consider signing up to initiatives such as eInvoicing, which enables faster payment times, and are cheaper to process than other payment methods.