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Small businesses seek their pay day

AAP logoAAP 15/11/2016 Paul Osborne, AAP Senior Political Writer

Big companies and governments are sending small businesses to the wall, owing at least $26 billion in unpaid invoices.

The Australian Small Business and Family Enterprise Ombudsman is launching an inquiry into payment times and practices which impact on the livelihoods of almost five million Australians who are involved in small business.

Research has shown 90 per cent of small business failures are due to poor cash flow.

Small business ombudsman Kate Carnell said small businesses were more frequently falling victim to the unscrupulous payment practices of some big businesses and governments.

"From stipulating unfair payment terms in contracts, to simply not honouring agreed payment times, a number of big businesses are effectively treating the little guys as banks by forcing them to provide interest free-loans in the form of late paid or unpaid invoices," she said.

"Chasing overdue payments causes stress and anxiety; it's a waste of time and it fundamentally stymies growth by forcing the business to focus on surviving rather than thriving."

It was vital to the Australian economy for payment times to be the shortest in the world, rather than the longest.

Studies have found the average Australian small business is owed $13,200 at any one time and small business owners spend an average 12 days a year chasing unpaid invoices.

More than one in five operators have been forced to take on loans or credit to pay suppliers or wages.

It is the first self-initiated inquiry by the ombudsman.

Its terms of reference are:

* The practice of corporations setting payment terms particularly for small businesses;

* Trends in payment terms and late payment with emphasis on commercial dealings between small business with large corporations or governments;

* The effects and impacts that long payment times have on small businesses; and

* Potential regulatory and market-based responses such as unfair contracts legislation.

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