There will be a government inquiry into late payment of small businesses.
One of the criticisms levelled at president-elect Donald Trump during the highly contentious U.S. election campaign was that the businessman reportedly stiffed subcontractors who’d been hired to undertake work for his various business ventures.
Numerous small businesses from carpenters to plumbers and chandelier installers came forward to say they hadn’t been paid on time, or worse still, hadn’t been paid at all.
President-elect Donald Trump and House Speaker Paul Ryan on Capitol Hill in Washington. Photo: AP
Unfortunately, the issue of late payments is far from unique.
Tradesmen like plumbers were accusing the President elect of non payment.
Here in Australia, more and more small businesses are falling victim to the unscrupulous payment practices of some big businesses and even some governments that are quite frankly, a drag on productivity.
From stipulating unfair payment terms in contracts, to simply not honouring agreed payment times, a number of big businesses are effectively treating the little guys as banks by forcing them to provide interest free-loans in the form of late paid or unpaid invoices.
Trade-payment data shows fluctuating trends in this space, but perhaps the most striking research comes from a global comparison which found Australia lags behind the likes of South Africa and Mexico when it comes to businesses paying by the due date. The study compared payment records from around the world and concluded Australia on average paid more than 26 days late; that’s almost a month spent waiting for invoices to be reconciled.
Given small businesses typically operate on extremely tight margins, a month is simply too long to be left in the lurch. As any small business owner will tell you, cash-flow is king; a recent Dun & Bradstreet study reports more than 90 per cent of businesses fail as a result of poor cash flow. And when you consider estimates on the debt owning to small businesses across the country is as much as $26 billion, it’s obvious this situation is untenable.
Chasing overdue payments causes stress and anxiety; it’s a waste of time and it fundamentally stymies growth by forcing the business to focus on surviving rather than thriving.
If small-to-medium sized businesses start falling off a cliff, economic conditions in Australia will certainly follow, so it’s incumbent on big businesses and governments to follow best-practice and pay their bills on time.
Does your small business have cash-flow issues?
If your small business is struggling with cash-flow, the team at The Garis Group have 20 + years experience in helping small to medium businesses just like you, to achieve success through the development of a business plan. We work with you to understand your industry, constraints and possibilities to tailor a plan that is best suited to you and your business. So be sure to contact The Garis Group on 024969 4699 and take your first step towards creating a beautiful financial future.