Microanalysis has always taken a very strong stance in relation to our payment terms. Respecting the importance of our cash flow, has been at the forefront of our business model and will continue to be. The trend for the larger multi-nationals asking for increased payment terms, some as large as 90+ days, has had a ripple effect across many small businesses. We have consistently remained vigilant on this issue, keeping our standard prices only applicable to approved clients who agree to our payments terms of 30 days from date of invoice. We have found many of our clients respect our payment terms and we benefit from a mutually beneficial working relationship.
For many small businesses however, this has become a huge issue. Small businesses constitute 97% 1 of businesses within WA and are vital to our economy. Establishing a framework that supports and encourages a healthy cash flow for these businesses is critical. As result the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), in partnership with the Small Business Commissioners in New South Wales, Victoria, South Australia and Western Australia, and in association with the Council of Small Business Australia (COSBOA) and the Australian Institute of Credit Management (AICM), recently conducted an inquiry to examine payment times and practices in Australia.2
Their terms of reference were:
- The practice of corporations setting payment terms particularly for small businesses;
- Trends in payment terms and late payment with emphasis on commercial dealings between small business with large corporations;
- The effects and impacts that long payment times have on small businesses; and
- Potential regulatory and market-based responses available including recent developments such as unfair contracts legislation.
For the full Payment Times and Practices Inquiry Report, click here.
In short there have been 10 recommendations to the Australian Government following this inquiry, to assist small businesses. Of particular note is recommendation 8 & 9:
Recommendation 8: The Australian Government to introduce legislation for larger businesses to publicly disclose all of their payment times and practices and performance against those terms. Larger businesses being the top 100 listed on the ASX and multinationals.
Recommendation 9: Australian Government to introduce legislation which sets a maximum payment time for business to business transactions. Certain industries may need terms greater than the maximum which can be agreed providing they are not grossly unfair to one party. Where a longer term is called into dispute it will be considered an unfair contract term 3.
A recent analysis of average annual payments from over 300 clients this financial year has seen a healthy 28 days average for payment from date of invoice. We do have some outliers, companies that we will continue to work with to bring in line with our standard terms. Overall, we are extremely pleased with the positive financial relationships we have developed with our clients and suppliers. Spending less time chasing overdue invoices leaves us with the time to do what we do best, analyse your samples, and enables us to continue to provide affordable scientific analysis to all for many years to come.
Debbie Hughes
