The clock is ticking for the the Business Council of Australia and the voluntary payment code for small businesses it hopes will head off legislation.
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Why small businesses are in trouble
Small business ombudsman Kate Carnell says some big multinationals are driving small enterprises out of business through late payments.
The industry-led Australian Supplier Payment Code unveiled on Monday binds signatory businesses to pay small business suppliers within 30 days of receiving a correct invoice.
The 32 signatory businesses, including the big four banks, Telstra, Coca-Cola, Lion, Energy Australia and Qantas, have also committed to help suppliers implement new technologies and practices to speed up invoicing.
![Jennifer Westacott launched the voluntary payment code on Monday.](http://web.archive.org./web/20170601030935im_/https://www.fairfaxstatic.com.au/content/dam/images/g/u/t/g/2/5/image.related.articleLeadwide.620x349.gwf72n.png/1496097969394.jpg)
The code includes a process for dealing with complaints and disputes about payment times.
The BCA claims in some cases adoption of the code will more than halve payment times to small businesses and it signals "a new age of co-operation and mutual respect between businesses – big and small".
Payment times inquiry leads to pressure
The BCA's voluntary code comes as big businesses are under increasing pressure over late payments to small businesses following the Small Business and Family Enterprise Ombudsman's inquiry into payment times that reported back in April.
The inquiry, headed by ombudsman Kate Carnell, found almost half of all small businesses have more than $20,000 owing to them in late payments and that small businesses are being used as a form of "cheap finance".Â
![Kate Carnell will call for legislation within a year if the code does not deliver.](http://web.archive.org./web/20170601030935im_/https://www.fairfaxstatic.com.au/content/dam/images/g/r/1/5/k/3/image.related.articleLeadwide.620x349.gwf72n.png/1496097969394.jpg)
Carnell advocated for legislation requiring on time payments to small businesses following the lead of Britain and Ireland.Â
But BCA chief Jennifer Westacott says rather than being an attempt to avoid legislation the voluntary code is "an attempt to say let's try self-regulation and get a cultural change".
![Michael McCormack says he will monitor the code.](http://web.archive.org./web/20170601030935im_/https://www.fairfaxstatic.com.au/content/dam/images/g/r/q/2/b/n/image.related.articleLeadwide.620x349.gwf72n.png/1496097969394.jpg)
"This is about getting a behaviour change not getting a piece of law in place," she says. "It's something that has come from the companies themselves wanting to get ahead of this sense of frustration of small business with payment terms."Â
A step forward
Carnell says the code needs to deliver.Â
It's one thing signing one of these and it's another thing delivering it.
Kate Carnell
"We think it's a step forward," she says. "What we have said is we will closely monitor it, there is a review at 12 months and we will review it every three months. It's one thing signing one of these and it's another thing delivering it."
Carnell says it's good to see a number of businesses signed up to the code who were "major offenders", such as BHP, Rio and Lendlease.
"There are some important companies that were offenders on the list but there are a whole range that aren't on the list," she says.
Major construction companies such as John Holland have so far failed to sign up alongside major transport companies and multinational food manufacturers such as Mars, Kelloggs and Fonterra, which have come under fire for payment terms of up to 90 days and finance arrangements "pretty close to extortion".
"Lion and Coca Cola are a start but the others aren't there," Carnell says. "If a significant majority haven't signed up in 12 months we will be asking the government to legislate or regulate like the UK. I'm always keen on having less legislation and regulation if you can deliver without it so the challenge now is for big business to deliver without it. It hasn't worked in other parts of the world but that's a message to big business here that they have seen what has happened if businesses don't deliver on voluntary codes, governments get in and regulate."  Â
The Council of Small Business of Australia has backed the BCA code and chief executive Peter Strong says he is positive about the code's potentialÂ
"It is creating change and you can't be negative about that," he says. "Thirty-two people have signed up now, which somebody said to me wasn't a lot but it's still 32 more than we had a year ago.  A year ago I wouldn't have dreamt of this."
Small Business Minister Michael McCormack will also be monitoring the signatories to the code.Â
"While I welcome this code as a positive first step, I will be keeping a close eye on how the code is adopted, its take-up rate, how it works in practice and the encouragement it provides to big businesses throughout Australia," he says.Â
More businesses to sign up
Westacott says the focus shouldn't be on the number of businesses that have or haven't signed up.
"The number here is not the key issue, it's the size and nature of the companies, it's Qantas, BHP, Rio, healthcare suppliers and all the four major banks," she says.
"It's all about who has the supply chains in the economy. This is obviously the first group of people from July 1 and many other companies say they want to join but they have to sort out their systems first." Â Â
An earlier version of this article incorrectly stated that Coles and Woolworths had also signed up to the voluntary code.Â
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