Greensill issues final warning on payment terms

Greensill gives ‘formal notice’ to firms still using its supply chain services to delay payments to small business beyond 30 days.

Lex Greensill has committed to ending the practice of stretching out payment terms to up to 95 days.

Supply chain financier Greensill says it has issued a final warning to companies that use its services to push out small business payment terms beyond 30 days, saying it has given “formal notice” to its remaining clients insisting on longer payment cycles.

The warning follows revelations in The Australian that, despite a February commitment from founder Lex Greensill to end the practice, an arm of contracting giant CIMIC was still offering Greensill’s services on a West Australian tender with payment terms of up to 95 days, or 65 days from the end of the month in which an invoice was submitted.

Documents seen by The Australian show contractor UGL, owned by CIMIC, was still pushing Greensill’s supply chain finance services to small businesses tendering for work on a resources project in the state’s Pilbara region in April, in exchange for a discount on the invoice, casting doubt on Mr Greensill’s promise to dump clients that have payment terms of longer than 30 days.

In a statement issued on Thursday, Greensill said “virtually all” its clients in Australia are now offering 30-day terms or less for SMEs, but it had set a deadline for the remaining holdouts, on the threat of terminating its relationship with them.

“In February, we informed all of our Australian clients that we expected compliance with our public statement to not let clients use Greensill's SCF to push out payment terms to SME suppliers beyond 30 days,” a spokesman said.

“Greensill has allowed a period for the remaining clients to complete their internal reviews stemming from our request. We have given formal notice to those clients that their SCF facilities will be discontinued unless they ensure that they do not use our SCF facilities to push out payment terms to SME suppliers beyond 30 days.”

CIMIC has made extensive use of supply chain financing over the last few years, and extended UGL’s payment terms to 65 days in September 2019. According to its February annual report it had $851.3m worth of supply chain finance arrangements in place across its operations at December 31, up a massive 51.7 per cent from the $561m at the end of 2018.

Small Business Ombudsman Kate Carnell told The Australian she understood Greensill had given CIMIC an “opportunity to lift their game and have put them on notice”.

“We welcome Greensill’s public statement today, reiterating its position that it will not allow its supply chain finance facilities to be used by Australian clients which extend payment terms to SME suppliers beyond 30 days,” Ms Carnell said.

“As recommended in our final report on our supply chain financing review, federal legislation requiring small businesses to be paid in 30 days is the only way to drive meaningful cultural change in business payment performance across the economy.

“Last year the Prime Minister said the government would introduce a rule requiring businesses with commonwealth contracts to pay their suppliers within 20 days. That’s certainly a step in the right direction and can’t happen soon enough.”