The most important, practical issue facing all small business people is getting paid on time. But when working for a large business, far too many of us self-employed ‘mugs’ discover that we’re being used as a cheap source of finance for our ‘clients’ through delayed payments.
The Morrison government set up a ‘big business–pay small business on time’ reporting system. The Small Business Ombudsman’s latest analysis of payment times shows that ‘more than half of big businesses are missing their own deadlines for paying their small business suppliers’. This is damning of Australian big business. It’s a rort that’s being going on for decades.
Construction sector ‘pay on time’
But there is one brighter spot. In the construction sector, subbies are routinely screwed over by big builders paying invoices really late. However, the construction regulator, the ABCC, runs a system requiring builders to pay subbies on time. It’s very effective.
This is because the ABCC’s power enables a significant ‘closing of the stable door before the horse bolts’. The key is that the ABCC’s powers rely on commercial triggers, rather than complex legal or administrative processes.
That is, construction contractors risk losing access to Commonwealth government-funded contracts if they fail to pay their subcontractors on time. It works really well. The outcome is that big builders don’t dare pay subbies late. The commercial risk is too high.
However, the construction unions hate the ABCC because the ABCC takes militant unions to court for breaking the law. Now the Albanese government is to close the ABCC to keep the unions happy. Okay. Fair enough. We all understand the political play.
Please keep the good bits, Albo!
We’re asking the Albanese government to ‘please keep the good bits of the ABCC’. In other words, keep the processes in construction that ensure that small business subbies are paid on time. It’s really important.
Numerous attempts by governments to find regulatory fixes for late payments in the construction sector have a poor record. The ABCC’s model, on the other hand, has worked.
- When payments are within agreed/required terms, better cash flow management operates throughout the sector.
- Better financial discipline operates through the sector when builders do not/can not exploit subcontractors as forced financiers of their businesses.
- When payment times are tight and major builders go broke, the loss exposure of subcontractors should be/is limited to the agreed/required terms of trade. That is, loss exposure should be limited to (say) 30 days of trading instead of (say) 90–120 days of trading.
Our interest is of course the construction subbies—that is, the self-employed people who actually work on the tools, physically doing the building—and the myriad of self-employed specialist construction consultants as well. But frankly, proper payment times are good for everyone.