No bill paid on time
Damning report into how slow paying big business killing economy.
Wednesday 15 February 2017
A new report has found that the number of small and medium-sized enterprises (SME) in mining not being paid on time, is more than double that of other industries. It also found that 36% of mining businesses had more than 20 invoices outstanding which is more than twice the percentage in the non-mining sector.
The survey of more than 800 businesses was commissioned by cash flow finance company The Invoice Market (TIM) and comes nearly twelve months after the region's biggest miners Rio Tinto and BMA outraged local SME’s by announcing that they would be more than doubling the time they took to pay their bills.
At what now looks to have been the bottom of the mining downturn, both companies said they would be moving from 30 to 60-day terms. However, in reality, the fine print of the contracts meant larger businesses might wait more than four months to get paid, and no one would be paid for work they did for at least two months.
That’s also assuming bills were processed on time, which the report says they never are.
With so much subcontracting in the resources sector, these hyper extended payment terms enforced by the top-tier miners has inevitably led to a cascading effect which has slowed payments through the entire Central Queensland economy.
Perhaps explaining why the TIM report found that while 1 in 5 large corporations failed to meet their own hyper extended payment terms, SME’s were not paying their bills on time either.
“ Miners are the worst performing SME sector in Australia for chasing debts, with 57% of resources companies owed more than $50,000, compared with 24% for other industries,” TIM reported.
“36% of mining businesses have more than 20 outstanding invoices owed to them – compared with 18% for the rest of the country.
“Miners say that 79% of all those who owe them money are small or medium-sized operators, with only 21% from large Australian or multinational firms which suggests that failure by one small operator to pay another is having a compound effect throughout the resources sector.”
However, even if local businesses can get the work in the first place, and live with the hyper extended payment terms, it appears that’s just the beginning of the problems.
One hundred percent of mining business surveyed said they were paid late, of which a third said they were paid between 30 and 60 days late.
The top three reasons given for late payment were that it hadn’t been processed (36%), it was in dispute (21%) or not approved (14%). In nearly one in ten cases, businesses had to ask five times to be paid.
According to TIM spokesperson Angus Sedgwick, slow paying is killing business.
"In the mining sector, SMEs say that 79 per cent of all those that owe them money are small to medium-sized operators," he said.
"So in other words, it's SME's delaying payment on their other SME clients, but that probably starts at the very top.
"SMEs that supply the mining industry are perpetually owed on average $78,000 as opposed to $38,000 which is the Australian average.
"That's double the national average of all sectors, so it's having a devastating impact on the local mining economy.
"It’s not only extended payment terms, but businesses also are not even meeting those payment terms."It's very concerning and needs to be addressed."