BHP drops fast payment terms introduced during pandemic

BHP has dropped the faster payment terms it introduced to help its suppliers survive the coronavirus pandemic.

A spokesman for BHP said the accelerated payment terms had only been planned for six months through the depths of the pandemic’s first wave.

BHP has rolled off assistance to small business suppliers of the company, dropping the faster payment terms it introduced to help its suppliers survive the coronavirus pandemic.

The mining major shortened its payment terms for Australian small businesses to a seven-day turnaround in March, saying it would immediately pay off all of its outstanding invoices and help deliver more than $100m into the bank accounts of 1100 small business service providers and suppliers.

But, with the Australian mining industry having largely powered through the pandemic, BHP removed the assistance measures in October, reverting to 30-day payment terms in place before the pandemic took hold.

A spokesman for BHP said the accelerated payment terms had only been planned for six months through the depths of the pandemic’s first wave, and had reverted to normal as the crisis eased.

“As the states where we operate have entered a new ‘COVID-19 normal’, the temporary measures implemented at the onset of the pandemic have been progressively returned to normal. We continue to work with our local, small and Indigenous business suppliers and support them through this period,” he said.

Resources majors Origin Energy and Fortescue Metals Group also dropped their payment terms for small business suppliers and service providers in March, citing the impact of the coronavirus.

But of the three, BHP is alone in rolling back the accelerated terms, with both Origin and Fortescue electing to maintain shortened payment times for the moment.

Origin is feeling the impact of the pandemic as some of its retail and commercial clients struggle to pay their energy bills due to the pandemic, with the company offering relief packages to customers in difficult circumstances.

But a spokeswoman for Origin said the company intended to maintain its accelerated terms for at least the next quarter.

“We will continue to assess the impact of the pandemic on our small business suppliers and ensure they are getting the right support. Our shorter payment terms are in place until at least the end of March 2021,” she said.

Fortescue began offering 14 day payments to Indigenous suppliers and companies based in WA’s Pilbara region in 2016, extending those terms in March to all companies with less than 20 employees, revenue below $10m and where Fortescue’s spend is less than $2m.

And although the broader resources sector is in rude health as global governments stimulate their economies to recover from the impact of the pandemic, Fortescue chief executive Elizabeth Gaines said suppliers to the iron ore major had indicated they still faced difficulties, and the company had elected to maintain its own payment term assistance.

“Fortescue understands the impact of COVID-19 continues to be challenging for many in our community, especially small businesses, therefore we are still offering 14-day payment terms to all small businesses, benefiting an additional 250 suppliers,” she said. “We also work proactively with suppliers that have specific cashflow challenges on a case-by-case basis to look at options for accelerated payment terms.”

Timely payment is a critical issue for small businesses which cannot dictate terms to their own suppliers and staff, are often required to pay their own bills on shorter terms than major companies, and must make those payments whether the big companies they work for pay on time or not.

In its November budget Victoria committed to paying small business suppliers within 10 days, as a measure to help stimulate the state’s economy, a move welcomed by small business ombudsman Kate Carnell as an important assistance measure for suppliers struggling to recover from the impact of the coronavirus.

While some resource companies slashed payment terms during the crisis, other major businesses moved in the other direction, with Spotlight, Sussan Group, Solomon Lew’s Just Group and Flight Centre all using the pandemic to push out payment times.

Payment times to small businesses blew out during the coronavirus crisis, according to CreditorWatch. But October data compiled by the commercial credit reporting bureau shows that businesses were still being paid an average of 31 days late on invoices, a 157 per cent increase on the same time in 2019.