Read all the latest news from Brendan O'Connor MP
Read all the latest news from Brendan O'Connor MP
Labor welcomes reported comments by ACCC Chairman Rod Sims about dodgy reverse factoring and ‘dynamic discounting’ arrangements where small businesses are fined to be paid on time.
“Payment terms of say four or five months are outrageous and it doesn’t make them any better that you pay a discount to get your money earlier”
“You just shouldn’t have a term of that length in the first place. This whole system looks like it’s a large player in a very dominant position taking advantage of that position to the disadvantage of small players. We are certainly going to investigate it.”
Labor wrote to the ACCC in October last year, outlining our concerns about such payment time practices to small businesses.
Making small businesses pay a fee to be paid on time is unconscionable.
‘Reverse factoring’ or ‘dynamic discounting’ products allow big companies to extend payment times, with small businesses later offered a third-party financier to pay the invoice on time but with a fee. This means small businesses aren’t receiving full reimbursement.
Reports yesterday revealed supply chain finance company Greensill and former Liberal Party deputy leader Julie Bishop admitted that small businesses are being fined to be paid on time, and yet silence remains the preferred response from the Morrison Government.
To date, Minister Cash has been silent on the issue and the Prime Minister met Lex Greensill personally as he spruiked his services. A strong stance and leadership is needed on this issue.
Labor is part of a chorus of voices concerned about certain supply chain finance arrangements, including ratings agencies, international audit firms, the Australian Accounting Standards Board, and the Australian Small Business and Family Enterprise Ombudsman Kate Carnell who is currently running an inquiry in supply chain finance.
Small businesses require prompt payments to help manage cash flow and to grow, particularly when access to finance is tight. The economy does not benefit from this type of financialisation that only benefits middlemen.