Big business and government could be penalised for delaying paying the invoices of their small-business suppliers in a new push by the Small Business and Family Enterprise Ombudsman to weed out unfair business behaviour.
An international study of 30,000 invoices from 80 countries found Australia is lagging the rest of the world in terms of late payments, described as the "silent killer of modern business".
Small business ombudsman Kate Carnell wants to ensure Australia has the shortest payment times in the world, instead of the longest.
She will consider potential regulatory and market-based measures – such as the recently introduced unfair contracts legislation – in the inquiry which will report to government by March 2017.
Research by the UK-based Market Invoice found
Australian businesses were being paid 26.4 days late, far later than the next latest country, Mexico, with 18.6 days, or South Africa at 16.5 days late.
According to statistics compiled by the Ombudsman's office, 90 per cent of small business failures are due to poor cashflow, small businesses are owed $26 million in unpaid invoices and the average owed for each small business at any one time is $13,200.
In addition, small business owners spend an average 12 days a year chasing unpaid invoices and 27 per cent of small businesses have been forced to take out loans to pay their suppliers and wages.
It will be the first self-initiated inquiry since the Small Business Ombudsman office was established by former small business minister Bruce Billson in 2015.
The inquiry will look at the practice of corporations setting long payment terms for small business.
The practice of longer payment terms began in the fallout of the global financial crisis with some big businesses telling their smaller suppliers that instead of being paid in 30 days, it would be in 45 days, and 60-day payment terms would be extended to 90 days.
Rather than risk losing a big client, many small businesses accepted the new terms but the shorter payment schedules never returned even as the economy recovered.
