Chevron lashed over supplier payment rort

Chevron is charging its suppliers to fast-track invoice payments as small businesses battle an unprecedented cash-flow crunch.

Federal Labor spokesman for West Australian Resources Matt Keogh, right, with WA Premier Mark McGowan

US energy giant Chevron is charging its Australian suppliers to fast-track invoice payments as small and medium-sized businesses battle an unprecedented cash-flow crunch and the economy teeters on a coronavirus-fuelled recession.

Chevron — which has paid zero income tax in Australia in the past five years, despite generating local revenue of $15.8bn in that time — is the latest company to unleash a supplier payday lending scheme.

Its so-called “early payment” scheme, which urges its suppliers to discount their invoices in exchange for early payment, has been labelled as opportunistic and taking advantage of struggling businesses as COVID-19 clouds their financial outlook.

The rollout of the scheme comes a week after Scott Morrison called on big business to take on some heavy lifting in an act of “patriotism” by fast-tracking payments to their small business suppliers to shore up the economy.

Federal Labor spokesman for West Australian Resources Matt Keogh said Chevron, which is planning to move into a $360m high-rise head office in Perth’s Elizabeth Quay, should pay its suppliers promptly as they battled uncertainty amid the COVID-19 pandemic.

He said such “early payment” schemes were unnecessary and took advantage of smaller businesses. “In the current climate, such behaviour by a multinational is even more unacceptable than it already was. Chevron should just get on with actually paying its suppliers to support small Aussie businesses,” Mr Keogh said. “Now is a time for us to band together, not take advantage of the little guy.”

Such payday lending-like schemes have many names, from reverse factoring and supply chain financing (the most popular) to the stripped down “dynamic discounting”, which simply cuts invoices rather than using intermediary financing. But the effect is the same — small business suppliers must take a financial hit if they want to be paid early.

Rio Tinto and Telstra have dumped similar schemes after The Australian revealed the pair had partnered with Taulia — a company incorporated in the low-tax US state of Delaware — which uses big data and artificial intelligence to calculate how much of a hit a supplier could take.

Chevron has partnered with US fintech C2FO, whose other clients include Cotsco, Pfizer and Mondelez, to launch its supplier payday lending scheme. It sent a mass email to it suppliers earlier this week urging them to sign up to the scheme, before sending a reminder email 24 hours later.

C2FO says it uses “technology to build a brighter future where enterprise cash works harder — for the enterprise, its vendors, and the world’s economy”.

But federal Labor’s employment spokesman Brendan O’Connor said such schemes were “unconscionable”, and “these dodgy payment plans … contribute to the economic woes we face”.

Small Business Ombudsman Kate Carnell is currently reviewing the use of supply chain financing. She said while it could be a legitimate business tool, many businesses were using it to blow out payment times for their suppliers. Ms Carnell said she would be forced to recommend tougher laws to the government if big business continued to use such schemes in this way.

A Chevron spokesman said the company paid its small suppliers 30 days from receiving an invoice.

“Chevron works to support our Australian small business suppliers through contracting strategies to avoid hardship created by extended payment terms,” the spokesman said.

“Chevron Australia’s payment terms for Australian small businesses with less than $10m turnover and fewer than 20 employees are most commonly (paid) 30 days from invoice receipt date.

“Chevron provides our suppliers access to an early payment program wishing to expedite payment earlier than their default payment term. This voluntary initiative enables suppliers to propose a discount for early payment. The uptake of early payment is at the supplier’s discretion and on invoices and discount rates selected by them.”

Other companies that use such practices include Gupta Family Group Alliance, which owns the Liberty steelworks in Whyalla, and construction giant CIMIC, which both have partnered with global financier Greensill, founded by Australian born business Lex Greensill. Numerous suppliers have complained about delays in being paid, and difficulties obtaining credit insurance. A number of senior Liberty staff have resigned.

For Greensill, the risks are growing. It financed Liberty’s acquisition of seven steel mills, including the Ostrava works in the Czech Republic, bought from Arcelor-Mittal for €740m ($1.36bn) in July, with a €2.2bn receivables facility. Greensill has lent money based on the sale of steel that is still iron ore and coal in the ground — a legitimate but racy form of financing. Much of that exposure has been passed on to lenders and credit insurers.

Additional reporting: The Sunday Times