Review announced into building and contracting payment times
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The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell announced a review into payment times in November, aimed at measuring the effects of late or extended payment practices on the cash flow of small businesses and family enterprises in Australia.
“In our 2017 Payment Times and Practices Inquiry, we found Australian payment times were the worst in the world, with invoices paid on average 26.4 days late,” Carnell says.
“We identified a growing trend for large Australian and multinational companies to delay and extend payments from 30 days to 45, 60, 90 or 120 days.
“More recent research involving 1,600 businesses identified the biggest cause of business disputes is payments (44%), with either the full amount not being paid (26%) or not being paid on time (18%).”
Six major issues were identified with the current state-based security of payment legislative regimes that lead to delayed and disputed payment, including:
1. With the exception of Queensland, none of the existing state and territory legislations provide any effective ‘security’ of payment where a party higher up the contractual chain becomes insolvent.
2. The legislative regimes are unduly complex, and this has discouraged their usage and caused confusion.
3. There are questions around the process of appointing adjudicators; the adequacy of qualifications, training and grading of adjudicators; and the variable quality of adjudication decisions.
4. There is an imbalance of bargaining power within the contractual chain and the practice of passing on contractual risks has resulted in the imposition of unfair contract terms that operate to prevent payment to the party that has carried out construction work.
5. There are suggestions that acts of intimidation and retributive conduct by head contractors discourage subcontractors from pursuing their entitlements.
6. Late payment continues to be a major issue for the construction industry.
ASBFEO has a five-minute survey for small and family businesses to fill out so they can get a better idea of the state-of-play on payment times and practices in Australia: www.asbfeo.gov.au