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October 30, 2019

 Following Minister Cash’s refusal last week in Senate Estimates to commit to asking the Small Business and Family Enterprise Ombudsman to commence a review into supply chain finance, Labor welcomes today’s announcement by the Ombudsman of a review.
In particular, we welcome the focus on contrived “reverse factoring” arrangements used by large businesses to obscure unreasonable extended payment times to small businesses. As noted in the Ombudsman’s media release:
“it is totally unacceptable for big businesses to use supply chain financing arrangements as a replacement for reasonable payment terms being offered, 30 days or less from invoice”.
Small Business Minister Michaelia Cash needs to publicly lend her support to the review - but to date the Minister has been silent on the issue of reverse factoring.
Labor is part of a chorus of voices concerned about certain supply chain finance arrangements, including ratings agenciesinternational audit firms, the Australian Accounting Standards Board, and the Ombudsman Kate Carnell who said in the Payment Term review in March:
“[Third-party financing] must not replace reasonable payment terms being offered, 30 days or less from invoice, and paying to those terms. It is not acceptable for large business to use small suppliers to optimise their cash flow.”
Labor has already written to the Australian Competition and Consumer Commission requesting they investigate dodgy supply chain finance arrangements under competition law. The ACCC  have reportedly involved the Australian Securities and Investments Commission in their inquiries.
The investigation was prompted by correspondence from Federal Labor, following a number of serious concerns raised by small business suppliers including through our Small Business Listening Tour.
Small businesses require prompt payments to help manage cash flow and to grow, particularly when access to finance is tight.
Yet Minister Cash’s contempt for small business has been on full display. Just last week, Senate Estimates revealed four ways Minister Cash has zero interest in fair payment times for small business:
1. The Government has not publicly responded to the Small Business and Family Enterprise Ombudsman’s report into payment times it received in 2018.
2. Since the election, the Government has not officially requested any reviews from the Small Business and Family Enterprise Ombudsman. Official government initiated inquiries give the Ombudsman the power to compel witnesses to public hearings.
3. Minister Cash refuses to clarify if ‘reverse factoring’ arrangements will be ruled out of its payment time transparency register of the largest 3000 companies.
4. Minister Cash refuses to clarify if ‘reverse factoring’ arrangements will be ruled out of its commitment to pay small businesses within 20 days on Commonwealth projects.
It is increasingly clear that the Liberals take small business for granted, setting the conditions that allow big businesses to treat small businesses like piggy banks.