A scathing report from the government’s hand-picked Small Business Ombudsman, Kate Carnell, has laid bare the extent to which big businesses are using small businesses as a bank by refusing to pay bills on time and continually pushing out payment times.

The Payment Times and Practices Inquiry report shows that Australia’s big businesses are among the world’s worst when it comes to late payment. The report notes:

“there has been a growing trend in payment practices, particularly amongst large Australian and multinational businesses, to extend payment times. The growth in extended payment times is partly linked to the practices of multinational businesses who apply global policies to improve their working capital efficiency. Extending payment times for suppliers effectively uses the businesses in the supply chain as a cheap form of finance.”

Among the worst offenders have traditionally been the big supermarkets: last year, Woolworths began trying to push out its payment terms from 30 days to 60 days. However, Coles recently cut its payment times for small business from 30 days to 14 days.

The inquiry revealed a quite extraordinary phenomenon — not merely were some of the world’s biggest companies routinely holding back payments for up to 120 days, they were supplementing the interest being earnt by withholding payment by offering low-interest loans to the businesses they were stiffing to tide them over — in effect making money twice over from withholding payment. “Mining companies are bad, the big construction companies are bad, it seems that the worst offenders are those multinationals headquartered out of the United States,” Carnell told Fairfax.

The report calls for the government to set the standard by making its payment terms 15 days, and to require businesses who take on government projects to match or better those terms. Carnell also wants legislation to require transparency of payment times by large companies, and to set maximum payment times. 

The multinational lobby group the Business Council of Australia, which is quick to lecture governments about good practice and harangue the rest of the community on the need to put the interests of business first, is resistant to legislation and insists the problem should be dealt with via a code of conduct written by big business.

BCA head Jennifer Westacott insists “average payment times have fallen across the economy”, a claim contradicted by the report. “A voluntary, industry-led effort to drive change in payments culture and practices should be given time to work before any consideration of regulation, which would impose extra costs on all business and taxpayers. We need a culture of cooperation, not compliance.”

The problem is, this issue has been around for years and small business groups like the Council of Small Business Australia have been raising the issue directly with the BCA over an extended period, only for the problem to get worse. The multinationals ripping off small business are neither complying nor cooperating, and don’t care who knows it.