Australian Small Business and Family Enterprise Ombudsman Bruce Billson interview with Emma Hannigan.

ABC Radio Gold Coast

Subject: Concern about small businesses being paid

Announcer

It's a challenging time for many small businesses. If you're the owner of one, what is the biggest stress you are under at the moment? New figures from the Australian Small Business and Family Enterprise Ombudsman shows a surge in requests for help from distressed business owners who fear they won't be paid by those who owe them money and are worried about their own ability to meet financial commitments. Reporter Emma Hannigan spoke with the Ombudsman, Bruce Billson, about these concerns. 

Bruce Billson

The small business environment's extremely challenging right now. We're seeing a lot of small business owners really concerned about getting paid on time, a wariness about whether other businesses they're dealing with are solvent and also new challenges as more turn to digital platforms to find customers. 

Emma Hannigan

What is the main concern for small businesses at the moment? 

Bruce Billson

Well, the biggest concern, by quite a margin, is about getting paid. That could be either people receiving goods and services and then not paying in the time that's been agreed, or some contest over whether what was to be delivered, has actually been provided. But either way, we're seeing about 40% of our caseloads relate to delays in getting paid, and that, on top of some big businesses with appalling payment performance for small business suppliers, is a real concern for cash flow-dependent small enterprises. 

Emma Hannigan

Speaking of cash flow, what is the flow on effect for businesses if they're not getting paid, or they're concerned about not getting paid? 

Bruce Billson

Well, the flow on effect is quite insidious, as it's not only a concern and a problem for the business waiting to be paid. That business also has suppliers and staff that it has to pay. So it can have a compounding effect, a cascading effect, where one business not paying in a timely way can have enormous implications for others, and in some cases, even make the business vulnerable for insolvency. Cash flow is the oxygen of enterprise, and if you not seeing those payments made in a timely way, it really can put the business in a precarious situation. 

Emma Hannigan

What kind of impact does this have on the well-being of small business owners? 

Bruce Billson

We've seen recent research from Treasury showing that a significant percentage of small business owners are expressing concerns about their own emotional and mental wellness. It's a big responsibility owning and running a business, and then, not only are you dependent on yourself for your own livelihood, but there’s also others that are equally dependent on it. For many business owners, their identity and their sense of purpose is almost central to their reason for being self-employed, and it makes business ownership so much more demanding than retaining a job, for instance. So that's what we see, and we know that there are concerns that people feel overwhelmed. There’s many expectations, and when there's additional challenges, such as not getting paid, that can have a very, very significant emotional impact on business owners. 

Emma Hannigan

Bruce, are there policy changes that could be made to ensure that businesses are more stable and secure and don't have these kinds of issues from insolvent suppliers, or the concern about people becoming insolvent? 

Bruce Billson

Well, there's probably three things that can be done right now. One is to take timely payment more seriously. I'm pleased that the Government has invested in its payment time reporting framework, but we're yet to see any meaningful improvement in payment performance, with still one in four big businesses taking 120 days or more to pay small business suppliers. That's just shabby performance and action needs to be taken. 

Secondly, for the businesses themselves being more alert to the financial condition of parties that they're dealing with. We know the Tax Office is being far more aggressive now in pursuing debts owed by small business. And I think an appropriate step would be for the Tax Office to identify on credit reference platforms just who it is that they're concerned about where there are substantial debts outstanding, and then other businesses can decide on how and when to deal with businesses that have a significant tax debt outstanding. 

The third point would be to actually think about contingencies. Understanding that cash reserves for many businesses are depleted, but having some continuity plan, some reserves that can take account of circumstances that aren't what you plan for, and not place the business itself in a difficult situation. I think that could be a positive step also that government and policy makers could support with small businesses. 

Announcer

That's the Australian Small Business and Family Enterprise Ombudsman, Bruce Billson.