Supply chain finance company Greensill Capital has announced that it will not work with companies that do not offer their suppliers payment terms of 30 days or less, following the ACCC’s “engagement” with Greensill and one of its clients, engineering company UGL.
In a statement yesterday, the ACCC said that late in 2019 it became aware of allegations that UGL had unilaterally extended its payment terms to 65 days on new purchase orders and that it was advising suppliers requiring earlier payment to contact Greensill.
UGL allegedly told suppliers that in order to be paid earlier they would have to accept a discount and the invoice would be paid by Greensill.
The ACCC said: “Supply chain financing is not unlawful and in some cases can be a good option for small businesses. However, we are keen to ensure that supply chain financing is not used to push out payment terms for small business suppliers or require them to accept a discount in order to be paid within 30 days.”
The ACCC said UGL has agreed to restore shorter payment terms for its small business suppliers, moving from 65 days to 30 days in the new year.
The Australian Small Business and Family Enterprise Ombudsman has been campaigning against the use of supply chain finance in combination with extended payment terms.
Earlier this year it issued a position paper, saying late payments by large businesses to small businesses accounted for 53 per cent of business invoices and that late payments and long payment terms are the biggest risk to cash flow for small business.
The ASBFEO said many large businesses develop supply chain finance solutions for the purpose of extending payment terms.
“This practice severely impacts small business suppliers and is clearly unacceptable. There is increasing abuse of supply chain finance,” it said.
The government has taken some action on the issue. Legislation was passed in September that requires large businesses and government enterprises to report on payment terms for their small business suppliers.
The ACCC said it would continue to monitor the use of supply chain finance and the extension of payment terms in small business contracts.