Dr Craig Latham, Deputy, Australian Small Business and Family Enterprise Ombudsman, discusses how one of the major issues for small and family businesses is getting paid on time. He urges businesses to have their say via a short online survey, in light of Ombudsman Kate Carnell’s review of payment times and the impact on the cash flow of Australia’s small and family businesses. Craig delivered the keynote address at the recent Legalwise Family Business Advisory Conference.
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Australia’s family businesses are critical to the Australian economy – around 70% of all Australian businesses are family businesses and they employ more than half the workforce.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) advocates for small and family businesses and assists with resolving disputes. The Ombudsman has the legislative powers needed to influence our nation’s lawmakers, ensuring legislation and regulations are put in place to help businesses grow.
Small business challenges
Small businesses experience many challenges relating to:
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- accessing finance
- managing cash flow
- payment times
- energy prices
- cyber security
- red tape
- industrial relations
- occupancy costs
- government procurement
- accessing justice.
Family businesses experience the same challenges, but they have the added difficulty of balancing the needs of the family versus the business. Family businesses can also experience succession-related issues, lack of family communication, issues with remuneration of family members, lack of training, sibling rivalry and managing growth.
To avoid challenges such as these, it is important for family businesses to communicate with family members, have clearly assigned roles for each family member, develop a succession plan and use external advisers.
Accountants play an important role and can help family businesses to:
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- get ready to apply for finance
- plan for growth to ensure they are ready to expand
- review business structures and help to manage cash flow
- develop a business strategy and set goals.
Payment times and practices
One of the biggest issues for small and family businesses is getting paid on time.
The State of Late Payment 2016 Report by Market Invoice indicated that Australia lags behind the rest of the world on payment times, with invoices paid on average 26.4 days late.
In our 2017 Payment Times and Practices Inquiry, we found that almost 50% of the businesses surveyed had over $20,000 owing to them in late payments. Half also reported that over 40% of invoices were paid late and 20% indicated an average payment delay of more than 60 days.
In response to our inquiry, the Government announced that Commonwealth government entities would be required to pay businesses with contracts up to $1 million within 20 calendar days from July 2019.
The Government also announced the addition of a new clause in Department of Finance contracts that requires all primary suppliers to include the same payment terms they receive from a government entity to their subcontractors.
More recently, the NSW Government committed to fast track its payment policy, first to 20 days by the end of this year and then to five days by the end of 2019.
Ombudsman Kate Carnell recently announced a review of payment times to measure the effects of late or extended payment times on the cash flow of Australia’s small and family businesses. You can tell us about your experience by filling in a short survey at https://www.surveymonkey.com/r/PZP93X2.
We have provided advice to Minister for Small and Family Business, Michaelia Cash on how practices might be improved to better protect the cash flow of small and family businesses and identified big businesses that delay or extend payments.
Poor cash flow in the primary reason for insolvency in Australia – late and extended payment times can easily put someone out of business.
Dr Craig Latham is the Deputy, Australian Small Business and Family Enterprise Ombudsman. Craig’s experience stretches across business, academia and the public service in Australia and New Zealand. He has specialist expertise in commercial and tax law, regulatory reform, and private sector and cross-government collaboration. In his current role, Craig has a particular focus on speedy and low cost dispute resolution for small business and family enterprise. Craig holds undergraduate degrees in economics and law, a Masters of Law and a Doctorate of Philosophy focussed on regulatory systems. Connect with Craig via LinkedIn
