Kate Carnell, The Small Business and Family Enterprise Ombudsman, has come up with a unique plan to give our economy a $7bn boost.
To do this she has recommended to the government that they should rewrite the supply chain rules so that almost all contractors are paid within 30 days. Whilst this is a big recommendation it makes total sense as businesses, no matter their size would have much needed additional working capital to employ more staff and invest.
If such a plan was adopted the government would need to more clearly define a small business as for example, not including the top 100 companies or defining a small business as one with less than 100 employees. Whatever the rules there would be problems at cut off however Carnell suggests everyone should be paid within 30 days.
Under this plan, the framework should be administered by an appropriately funded entity that is proactive with enforceable powers.
Obviously there would be significant resistance from large businesses who use such systems as reverse factoring to delay payments and or seek significant discounts for reasonable payments. Late payments by large entities account for 53 per cent of invoices meaning that $115bn worth of invoices are paid late stopping $7bn of working capital from flowing into small business every year.
The beauty of this plan or recommendation is that it requires no government outlays but merely the adoption of appropriate legislation and oversight by a duly authorised agency. Basically a no brainer!