Rikki Lambert
The Small Business and Family Enterprise Ombudsman, Bruce Billson. Bruce, how are you today?
Bruce Billson
Pretty awesome to be with you and your audience.
Rikki Lambert
And Bruce, we've picked up something you've been saying about the data that's come out about how much small business, I guess it feels to me from what I'm reading between the lines, small business sort of carrying the can for big business when it comes to overdue bills.
Bruce Billson
Yeah, we're really concerned that the timely payment of invoices is a real issue for small and family businesses. You’ve heard that saying that ‘cash flow is king’ and we see too many small businesses waiting too long to have their invoices paid by big business. And, you know, to quote my inner John McEnroe after a bad line call, ‘you can't be serious’.
I mean, there's certain examples where big businesses are taking more than 120 days to pay their small business suppliers. And when the industry association for big business, the Business Council of Australia, says 30 days is their policy, well, the vast number of big businesses just aren't meeting the mark and it's causing needless harm and cashflow challenges for small and family businesses.
Rikki Lambert
I've often heard it said that in small business when people don't pay invoices, it's like you’re the bank, they’re kind of borrowing from you because you've spent the money. You know, is big business basically banking with small business involuntarily?
Bruce Billson
Look, there's a bit of that. I mean, if there if there wasn't a power imbalance and there was delay in a customer paying a supplier a bill, the supplier would usually cover the cost, you know, of the cash flow, the overdraft, the impacts of the big business taking longer to pay. But we know that there is a power imbalance. And, of course, the small business doesn't have that opportunity of passing on the economic consequence of delayed bills. So, it's more like big businesses paying late because they can. And that's not really acceptable.
Good businesses pay. They pay their employee entitlements, they pay their tax obligations, but they also pay their small and family business suppliers. They pay them in a timely way. And one of the things, Rikki, that we've been a little bit frustrated about is that two-thirds of big businesses have adopted their own payment terms where they aspire to pay within 30 days. Now, that's not that impressive. 30 days is well in the zone of mediocre at best. So, two-thirds of said will pay within 30 days, but only a third actually meet that fairly ordinary ambition.
So, there's plenty of scope for improvement. And at a time when small and family businesses are facing headwinds, big business can play their part by paying bills on time in a timely way and help get that cash going into the business for small and family businesses that have done what they said they do. They've provided the service, they've provided the input - pay the bills.
Rikki Lambert
Would there be a factor here where big business is simply struggling financially? Is that a bit of a signal that maybe we are heading into recession if they're acting this way towards small business? Is this only recently, this developed this data or has it been a trend for some time?
Bruce Billson
Look, it's been a worrying area for some time. And that's why, you know, initially the Business Council of Australia and some state governments got involved in having these payment time codes. We know governments have been leading the way with timely payment times or if they can't pay on time, they pay interest. So, this has been a concern for some time. And that's why you've seen the introduction of regulatory measures. The Payment Times Reporting Regulator goes around and accumulates payment times data from the largest companies, about 7000 of the biggest businesses in Australia that turn over more than $100 million.
So, Rikki, it's been around for some time and it's prompted those sorts of policy responses. What's troubling is it hasn't seemed at this stage to make a big difference in actual performance. So, what we're urging big businesses to do is actually do the right thing. You know, aspire to do better and then do better because we've seen some do much better during COVID. But it seems as though this focus has come off a little bit in recent times.
Rikki Lambert
Well, that seems to be where it becomes a bit more egregious as we trying to emerge from, you know, the conditions imposed during COVID 19, the recession we're trying to avoid or maybe we're in I'm not quite entirely sure. But when it comes to, I guess, small business trying to struggle out of that, but big business, I think as you've sort of implied, they've made plenty of money in some cases even throughout the pandemic.
Bruce Billson
Some have had a really good pandemic, their business model, the situation they've found themselves in, even the way customers have behaved and what customers have been looking for. It's been, you know, really good for a number of big businesses. And frankly, Rikki, a number of small and family businesses have had a pretty good you know, time of it during the pandemic for the same reasons.
You know, they've been well placed. Their business models responded to lockdowns and things of that kind. And frankly, there's been new problems to solve. And we know small and family businesses are really good at that. But to see these payment times where some made a real conscious effort during COVID, to be as shabby as they are, that is why I can't help but feel that John McEnroe moment. Big businesses you can't be serious if this is the best that can be done.
We've seen better. It needs to be better. And I'm calling for big business to embrace the good business pay's ethos and to actually do better.
Rikki Lambert
So on that note, is there something that small businesses can do? And notwithstanding the trendline we're seeing here, can I reach out to your office or someone else to try and get a business to pay up soon?
Bruce Billson
Well, in fact 40% of the requests for assistance towards our office relate to payment times. So this is something that's already becoming a significant feature. You know, it's not, not our role to be debt collectors, Rikki, but what we do do is where there's some contest or some dispute over whether services have been provided or in fact, the business is finding itself in trouble and struggling to make a payment, we can often get involved and facilitate a mediated resolution.
But even the Reserve Bank is noting an increase in the number of small and family businesses that are reaching into their own personal savings as a way of keeping, you know, the energy and lifeblood in their business. So, the Reserve's noted that cash balances have been falling over this calendar year.
Now that's a sign that businesses should pay their bills in a timely way. And that's my call. Urging big businesses to do the right thing and pay their small and family businesses in a timely way.
Rikki Lambert
If someone wants to reach out to your office. The web's probably the best way to look you up.
Bruce Billson
Yep. Probably the best way: www.asbfeo.gov.au So that's the acronym for Australian Small Business and Family Enterprise Ombudsman. So that's ASBFEO. Not really a foot fungus from Latin America or something like that. So www.asbfeo.gov.au and we've got some helpful resources on our website, but also a channel where people can raise particular concerns where they'd like our assistance.
Rikki Lambert
Alright well, if you want the assistance of the small business version of John McEnroe, that's how you get there. Bruce Billson, thanks for joining us today on Flow.
Bruce Billson
Rikki, always a treat. Take care.