Australian small business suppliers will soon see the benefits of faster payment times after Rio Tinto announced a change to its payment terms.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell said it’s a fantastic result for over 5500 small businesses that trade with Rio Tinto.
“By changing its payment terms for Australian suppliers under $1 million of expenditure to 30 days, Rio Tinto is taking a positive step forwards and understanding the needs of their small business suppliers,” Ms Carnell said.
Ms Carnell said late payments and the resulting lack of cash flow were an on-going issue for businesses in Australia and the lack of cash flow caused financial strain and is the leading cause of business insolvency.
“It’s evident the findings from our Payment Times and Practices in Australia Inquiry is hitting home with large business. I’m glad Rio Tinto is taking action to look after their valuable suppliers,” Ms Carnell said.
“It’s just good practice to invest in small businesses. The investment Rio Tinto has with Australian small business is huge, about $600 million in annual procurement spending on goods and services. Other large or multinational companies should follow the example set by Rio Tinto and ask themselves how they can improve their terms with small business suppliers or contractors.”
Rio Tinto’s current standard terms are 45 days from the end of month after a correct invoice has been received. The new terms, which will commence on July 1, will be 30 days from the receipt of a correct invoice. The suppliers affected by the change will be contacted by Rio Tinto before July 1, 2017.
The Payment Times and Practices in Australia report can be found on the ASBFEO website www.asbfeo.gov.au.