Coles cuts small suppliers some slack

Coles is backing small suppliers by slashing payment times, hopefully other big companies will follow suit.

The entrance to the Coles store in Melbourne. (Aaron Francis/The Australian)

The faster payment of small suppliers ball, which was put in play by Telstra, has been given a huge kick along by Coles.

Coles managing director John Durkan announced today that from July 2017 Coles would reduce payment times for more than 1,000 smaller merchandise suppliers. Small suppliers providing Coles with up to $1 million worth of merchandise annually will be paid on electronically submitted invoices within 14 days.

Currently, most of Coles’ small suppliers have to wait a lot longer for their money.

As I have written previously, for countless decades Australia’s largest corporations and government departments have been mercilessly bleeding cash from our employment ¬engine room — small and ¬medium-sized business.

In February, at the celebration 25th anniversary of the Telstra Small Business Awards, I asked Telstra’s chief executive Andy Penn whether he was prepared to make a start on ending the carnage by vowing that within six months all of Telstra’s small business suppliers would be paid within 30 days.

I was stunned when he agreed. Naturally I will be watching Telstra’s progress but now it is Coles’ turn.

The Coles press release quotes Leo Miller, the managing director of Tasmanian salad dressings and dessert toppings supplier Red Kelly, as saying that “this will make a huge difference to us. We are currently in 60-day payment terms so this decision will help our cash flow enormously and means we can pay our suppliers more quickly”.

Currently in Australia large corporations and governments love to delay payments but their borrowing interest rates are a fraction of those paid by small business. By paying quickly they can really help their supply chains serve them better. The problem is often corporate treasurers who often do not understand the bigger picture.

One of the reasons I am passionate about this is that on several occasions over my career I have been a part owner of a media business — the latest being Business Spectator which we sold to News Corporation (the publisher of The Australian).

Part of the art of running a smaller enterprise is to constantly watch the cash flow. There were a few occasions in the early life of Business Spectator when we were hanging on the payments of money owed. It’s an essential smaller enterprise mindset that executives of larger enterprises do not always understand.

Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell says the ASBFEO is currently undertaking an inquiry into payment times and practices in Australia, with preliminary findings indicating that payment times have become worse in the last 12 months, with large multi-national companies being the worst offenders. In fact, some large companies have moved payment terms to as long as 120 days!

Ms Carnell noted that, “Coles’ decision follows a pledge from Telstra who recently moved to reduce the time in which they pay their small business suppliers from 45 days, to 30 days or less.” She went on to commend both companies for their responsiveness on the issue.

As we look forward, Australian employment is going to swing much more vigorously towards smaller enterprises. That’s why the fair contracts legislation is so important and why the Australian Parliament has to make sure banks do not try to thwart the act (National Australia Bank is defying the will of the Parliament on fair contracts, March 3).

Reforming the tax system is of equal importance but so is ensuring the timely payment of small business suppliers. May there be many more that join Telstra and Coles.