TRICKLE DOWN TURMOIL

In all the recent gloom and doom from the global financial crisis one predictable and devastating side effect has been overlooked – at least until now. And even though the ACCC is on to it I’m not sure quite frankly what they can do about it. Especially in the short term. I’m talking about that classic indicator of business turning bad. Slow payers.

Accounts rendered and due for payment in 30 days suddenly don’t get paid. They stretch out to 60 days, ninety, even 120. The ‘cheque is in the mail’ becomes the national anthem.

The biggest culprits: Big business and  Governments and government agencies and the money they owe to small businesses. They exploit the fact that small businesses rely on them. Are beholden to them. Often don’t want to upset them unless they lose their custom.

And when a small business owner complains he or she is told: Sue me. The big boys know they can ‘dollar you to death’. Any court action will cost as much if not more than the actual debt.

The chief of the ACCC, Graeme Samuel, says that big businesses that deliberately delay paying their bills to small businesses will be hunted down and prosecuted by the competition watchdog. But that is easier said than done.

As Samuel himself says small businesses are often afraid to get involved in protracted court cases. ‘ ..They don’t have the time and they’re concerned they will lose the business of the customer’.

Sometimes the problem is the domino effect. A giant company pushes back payments from 30 days to 90 days for one of its suppliers. That supplier then delays payment for 120 days to the next company down the food chain. And so on.

But the biggest culprits –even in good times –are governments and government agencies. That’s why it is encouraging that Small Business Minister Craig Emerson has promised that, as of December 1, the Rudd Government will pay all contracts up to the value of $1 million within 30 days and if they don’t small business can charge them interest.

The next step will be to get the Tax Office to show a bit more heart and understanding and allow struggling businesses to pay tax debts in installments.  Instead of hitting people with heavy fines for even being a few days late with a BAS statement.

But I’ll believe that when I see it.

© Copyright Derryn Hinch 2008