The inquiry will focus on the late payment practices affecting Australian small businesses.
More details have emerged about the small business inquiry into late payments, which was initiated by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell in September. The final report is expected in March 2017.
A statement from the Ombudsaen today said the Payment Times and Practices inquiry will be "aimed at weeding out patterns of behaviour that are undermining the financial viability of small businesses and putting pressure on the entire economy."
These patterns revolve around the flow-on effects from larger corporations using smaller businesses as a line of credit by setting longer payment terms or delaying payment to suppliers.
MYOB CEO Tim Reed welcomed this "much-needed" inquiry.
"We know that late payments are an ongoing pain point for SMEs around the country."
"MYOB’s latest SME Snapshot (October) showed that more than three-quarters (77%) of SMEs were impacted by customers not paying their bills on time. As small business ombudsman Kate Carnell rightly points out, this can mean the difference between success and insolvency."
The inquiry will be seeking input from businesses and other industry stakeholders using submission, online surveys and public consultations.
The Ombudsman's statement said the inquiry will not only assess the impact of existing payment practices but also identify possible regulatory and market-based responses that can be implemented to address problem areas.
Reed says one response should be the introduction of a prompt payment code, similar to what is in place in the UK, which would see businesses become signatories to the code to ensure on-time payments.
"Some 72% of small business owners are in favour of introducing a voluntary code to encourage businesses to pay more promptly."Given the overwhelming support for this initiative, it would be a positive move to see the government and big businesses to put forward an initiative to implement a national prompt payment protocol to ensure small businesses are not being delayed payments by other businesses," he said.
"Given the overwhelming support for this initiative, it would be a positive move to see the government and big businesses to put forward an initiative to implement a national prompt payment protocol to ensure small businesses are not being delayed payments by other businesses," he said.
The Ombudsman has agreed that "cash flow is king to small businesses" and late payments have a huge effect on that.
"It’s vital these sorts of unfair payment practices are stamped out to ensure small businesses can reach their full potential, and in doing so, continue to contribute substantially to the overall health of the national economy."
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