THE BLOG

How Big Business Is Putting The Squeeze On Small Business

Size matters.

16/02/2017 1:33 PM AEDT | Updated 16/02/2017 1:34 PM AEDT
Getty Images/iStockphoto

Small businesses are the workhorse of the economy. The 2.1 million tradies, café owners, entrepreneurs and growing empire-builders employ 4 million Australians and contribute a third to our national GDP.

So why is so little being done in Australia to help support them?

Last week, Telstra CEO Andy Penn promised to pay small business invoices within 30 days. He is doing what many of Australia's biggest businesses fail to do -- paying small businesses on time and helping keep them cash flow positive.

In fact, reports suggest they have done the opposite, with some of our largest pushing supplier payments to 45, 60, 90 and even 120 days in some cases. Many of these decisions have happened in industries where market power is concentrated, giving suppliers little choice but to accept the payment terms, and often suffering as a result.

Our own customer data shows that over the past six months, one in five invoices payable by ASX 200 companies to small businesses were overdue by more than 30 days. 65 percent of small businesses had invoices overdue by more than 30 days at any time in the past six months, causing them to experience a cash flow gap. Today there are more than 3.8 million invoices awaiting payment.

Failure by big businesses to pay on time significantly puts small businesses on the back foot. Rather than focusing their resources on growing their business, they are being forced to spend it chasing payments that are rightfully due. In the extreme case, lack of payments can lead to small businesses going under.

Lacking the comparable big-business resources to fight back, small businesses are largely at a disadvantage, waiting patiently until they get paid their rightful sum.

Not only that, but this puts a large lag on the Australian economy as a whole. Delayed or negative cash flow to a third of the private sector means less expansion, fewer open jobs and less distributed throughout the economy. A struggling small business can't grow -- and a small business that can't grow is a pull on the economy as a whole.

It begs the question: what are we doing to help them?

Very little, compared to other regions.

Next month, a report is expected from an inquiry by the Australian Small Business Ombudsman into late payments. There is talk around a voluntary payments code, a positive step that has the potential to significantly help small businesses. But without the right guidelines and the right businesses involved, it's unlikely to improve current trends for small business.

The United Kingdom and United States have both recognised this as a problem. The UK has a payments code that pushes big business to pay invoices within 30 days while the US' SupplierPay initiative sees large companies pledge to pay small businesses within 15 days.

Australia is falling woefully behind and we need to be doing more to support Australian small businesses. It's not about pitting small businesses against big businesses, it's about working together to find a solution, to even the playing field, and work together to continue driving the Australian economy.

No business should be hindered because of its size or lack of resources to fight back. We need to work together to find a solution. We need to do better.

If we don't, the tale of the Aussie battler, surviving against all odds, is unlikely to be anything more than a myth.


ALSO ON HUFFPOST AUSTRALIA

More On This Topic