30 days net
CQ business leader wants Rio to go further on super slow payment
Wednesday 24 May 2017
Rio Tinto has made a minor concession to its suppliers this week announcing that they will return to standard 30-day trading terms for small business in the new financial year.
The decision comes nearly two years after BMA and Rio Tinto forced their suppliers to carry them through the downturn, by increasing the time they took to pay their bills from 30 days to between 60 and 120 days.
In a written statement, Rio Tinto’s Australian Managing Director Joanne Farrell said small business could now expect payment 30 days from when Rio received the correct invoice.
“Rio Tinto will reduce the payment terms for Australian suppliers under $1 million of expenditure to 30 days to help improve the cash flow for thousands of small businesses,” she said.
“The change will apply to more than 5,500 suppliers and will commence on 1 July.
“Our procurement spending is vital to many small businesses in Australia, and we understand that lengthy payment terms can create cash flow pressures for small to medium sized firms.
“We are addressing that from the start of the new financial year.”
In response to a query from Shift Miner, a spokesperson for BHP said they had no plans to change their current payment terms.
“BHP Billiton Australia grants standard 30-day payment terms to small businesses who are not contractors, employ fewer than 20 people and have an annual turnover less than US$5 million,” a spokesperson said.
“It also applies to local community suppliers whose primary business location is in a town close to one of our operations, or businesses who are 50 percent or more Indigenous-owned and demonstrate a commitment to the employment and training of Indigenous people.
“This has been in place since at least 2015.”
While welcomed, the concessions leave many small and medium Central Queensland mining suppliers out in the cold, still having to wait more than two months to get paid.
“Rio Tinto’s current standard terms are 45 days from the end of the month after a correct invoice has been received,” Rio said.
“These terms remain in place for larger businesses.”
Chairman of the Resource Industry Network in Mackay Tony Caruso says a lack of cash flow is the leading cause of business insolvency and at the very least is a major inhibitor to growth, R&D, and employment.
While he welcomed the changes, he says they don’t go far enough.
“The impacts of the extended trading terms are not limited to businesses with smaller spends,” he said.
“The extended trading terms equally affect the cash flow of businesses of all turnover and spend, forcing them to find ways to finance the shortfall in their working capital, instead of being paid in a reasonable time and using the cash flow to invest in their own business.
“It just doesn’t make good business sense for multinationals to lean on SME’s to improve their working capital efficiency.“We would like to see payment terms return to 30 days for all businesses across the board.”