SUBJECTS: ACCC moves to crack down on late payments by business
HINCH: Accounts rendered and due for payment in 30 days suddenly don’t get paid. They stretch out for 60 days, 90 days, even 120 days. The cheque is in the mail becomes the national anthem. The biggest culprits, big business, and governments, and government agencies. They exploit the fact small businesses rely on them, are beholden to them and often don’t want to upset them in case they lose their custom. And when a small business owner complains he or she is often told “sue me”, take me to court because the big boys know court action will cost as much, if not more, than the actual debt.
Now the chief of the ACCC Graeme Samuel says that big businesses that deliberately delay paying their bills to small businesses will be hunted down and prosecuted by the competition watchdog. It’s easier said than done. Samuel says that small businesses are often afraid to get involved in protracted court cases. He says they often don’t have the time and are concerned they’ll lose the business off the customer.
Sometimes, of course, the problem is the domino effect where a company pushes back payments from 30 days to 90 days for one of its suppliers. That supplier then delays payments to people he owes money to for 120 days further down the food chain and so on and so on.
The biggest culprits, even in good times, are governments and government agencies. That’s why it’s encouraging that Small Business Minister Craig Emerson has promised that from December 1 the Rudd Government will pay all contracts up to $1 million within 30 days. And if they don’t small business can charge them interest. Now the next step will be for the tax office to show a bit more heart and understanding to allow struggling business to pay debts in instalments. Still they are hitting people with heavy fines if they are a few days late with a BAS statement.
I’ll believe it when I see it. I wonder if you’re already feeling this pinch. It might have big ramifications for you because if small businesses start delaying paying their staff, superannuation is not processed and it goes on and on.
On the line Small Business Minister Craig Emerson – good afternoon.
EMERSON: Hi Derryn.
HINCH: Well this theory is good and I’m glad to see the ACCC doing this and the fact that you’ve announced the Federal Government is going to pay its bills promptly but your side is already done. How are you going to enforce the ACCC side of it?
EMERSON: Well you’ve certainly got your finger on the pulse in identifying the problem. The ACCC is saying to us, and we have approached them on this, is that where there is some sort of pattern to it that would constitute unconscionable conduct under the Trade Practices Act. And they’re quite keen to run a couple of test cases here.
The provision for unconscionable conduct hasn’t really been properly tested, certainly not lately, and my discussions with Graeme Samuel indicate he is bearing his teeth and is prepared to run a case or two where there is a pattern.
If a larger business has slipped up or it happens once in a blue moon, that’s different. But where a larger, more powerful business is trying to bolster its bottom line at the expense of small business suppliers, that could be unconscionable conduct and the ACCC would look very seriously at taking a case.
HINCH: See, one of the big offenders as I said in my introduction, during good times, is government agencies. They may owe small businesses up to 18 months?
EMERSON: Yes and in these difficult economic times that is completely unacceptable. I must say that when we came to government we had a look at this. Ninety-two per cent of invoices are paid within 30 days but that doesn’t excuse the other eight per cent.
You said in your introduction Derryn that we would ensure that if bills were not paid within 30 days the small business supplier can charge penalty interest. So that will focus the minds of the administrators of these suppliers because they will have to explain to people up the line why they’re incurring extra costs because of the laxness of not paying on time and in full.
HINCH: One point and it’s a big area for you, I read somewhere that the Federal Government has about 70,000 contracts that would be affected by this?
EMERSON: That’s right and it’s right across agencies not just the conventional government departments; the Australian Federal Police, all the different agencies as well. There are a lot of contracts and that’s a lot of money that can be tied up for small business particularly in difficult economic times, struggling with cash flow.
At the Small Business Summit that was held last Friday in Brisbane, this was identified as one of the key issues. Small businesses already feeling the pinch are really worried that they are going to get done over by more powerful businesses, who as you say, in harder economic times seem to adopt the practice. And I don’t mean every one of them adopts this practice, and say ‘it’s us or them’ and withhold payments. Well, bigger business can withstand that better than the small ones. We don’t want to see smaller businesses suffer. So the ACCC is going to bear its teeth and bite people on the bum if they start behaving irresponsibly or in any sort of pattern where they think ‘I’m a smartie’.
As you said again Derryn, they know in some of these bigger companies that these little businesses are going to need their custom and the little guys tend to get upset but don’t complain because they don’t want to lose business.
HINCH: It almost needs a whistleblower to prove that it’s against company policy to hold these people for 30 more days.
EMERSON: Well Derryn, I’m not a lawyer but that sort of thing would constitute pretty good evidence of some sort of systemic behaviour and that’s what the ACCC is really looking after.
They don’t want to create the impression that any business that is a few days late with a payment, or a few days over with their accounts, is going to fall foul of them. But maybe some businesses will seek to take advantage saying ‘we need to extend our payment date by 30, 60 or 120 days’. Well that would trigger a lot of interest from the competition watchdog.
HINCH: Okay thanks for your time.
EMERSON: Thanks Derryn.
ENDS.