PwC wins $120k contract to help government enforce prompt business payments

Is the $120k contract for PwC for the federal government’s payment reporting times framework a waste of money?

PwC has prepared material, readily available online, which explains how the scheme — also known as reverse factoring and described by the Department of Finance as “economically similar to payday lending” — works.

PwC, an advocate of the controversial practice of supply chain financing, has won a $120,000 contract from the commonwealth to support the implementation of the federal government’s payment times reporting bill.

The bill, which is before parliament, is designed to name and shame big businesses with a total income of more than $100m a year into paying their smaller suppliers within 30 days or less. A spokesman for Small and Family Business Minister Michaelia Cash said PwC had won a tender to develop “guidance material” to help corporations comply with the scheme.

“PwC is providing consultant services to aid in the design and development of guidance material that is user-focused and easily accessible to business. PwC has the required experience and expertise, and provided a value-for money service offering,” Senator Cash’s spokesman said.

But Small Business Ombudsman Kate Carnell questioned why the government was seeking advice from PwC, given its payment times reporting legislation applied to about 3000 of Australia’s biggest corporations which had in-house counsel and the expertise to follow government directives.

She also queried PwC’s role in advocating the use of supply chain financing schemes to lengthen payment times to its clients, despite Senator Cash’s spokesman saying the government had sought no advice from PwC on such arrangements.

“I’m a little bit fascinated why the government needs to get one of the big consulting firms to give them a hand on how to comply with the legislation,” Ms Carnell said.

“And I must admit, one of the things we have always been concerned about is big businesses using supply chain financing as the mechanism of appearing to be paying within 30 days or a shorter time frame than they actually are.

“PwC have been major advocates of using supply chain financing — not just using it because it’s a good product, but using it to blow out payment times. They are quite clear in their documentation that here is a great idea for businesses that they can blow out their payment times and use supply chain financing when companies need to be paid earlier.”

Supply chain financing schemes involve suppliers to a corporation discounting their invoices or paying interest in exchange for prompt payment of their ­invoices.

PwC has prepared material, readily available online, which explains how the scheme — also known as reverse factoring and described by the Department of Finance as “economically similar to payday lending” — works.

In a report prepared in July 2017, it said the benefits of adopting such a scheme included “longer supplier payment terms without having to ‘trade off’ with price — 30-50 per cent trade payables increase”, while suppliers received “faster access to cash at advantageous rates”.

In the same PwC report, the firm said those advantageous rates involved a supplier selling their invoices at a “predetermined discount rate”, allowing them to receive funds immediately.

A PwC spokeswoman declined to comment, stating the firm did not comment on client matters.

PwC’s advice is costing taxpayers $117,781. Senator Cash’s spokesman said it did not include any advice about supply chain financing schemes.

“The government has not sought advice from PwC on supply chain financing to inform the implementation of the (Payment Times Reporting) Scheme.

“To ensure large businesses understand and can meet the reporting requirements, the government will make available technical guidance material to provide business with clarity on requirements under the scheme. These materials will specify who needs to report; what and when they should report; and the compliance measures for not reporting or reporting false information. The department engaged PwC to prepare this guidance following a competitive approach to market, at a cost of $117,781.”

Following an investigation into the payment practices by The Australian, several of Australia’s biggest companies — including mining giant Rio Tinto and the country’s biggest telco, Telstra — have abandoned the use of supply chain financing schemes, while construction major CIMIC has wound back heavily on its use of supply chain financing and is now reviewing the continued use of the scheme.

Opposition small and family business spokesman Brendan O’Connor also criticised the government for awarding PwC a $120k contract.

“The practice of reverse factoring is unconscionable, requiring small businesses to pay a fee to be paid on time or have their payments blown out, yet the Morrison government has awarded the promoters of this payment practice a contract to write the official guidance for businesses who use it,” Mr O’Connor said.

“If the government was serious about ensuring small businesses are treated fairly, it would condemn the practice of reverse factoring, rather than pay out $120,000 of taxpayers money to a firm that promotes its use.”