Small business feeling the pinch from retailers

Retailers are blowing out supplier payment terms by as much as six months, placing small businesses under more pressure.

Small Business Ombudsman Kate Carnell said it was unacceptable for big companies to delay payments to smaller suppliers. Picture: Kym Smith

Retailers are blowing out supplier payment terms by as much as six months, placing small businesses under more pressure as they battle to survive an unprecedented cashflow crunch from coronavirus.

Sussan Group, which owns women’s clothing brands Sussan, Sportsgirl and Suzanne Grae, is the latest retailer to extend payment terms, telling suppliers they have to wait 90 days to be paid.

The payment term is more than three times the length stipulated in the Business Council of Australia’s voluntary supplier payment code — which says companies must pay their small business suppliers within 30 days — and contrary to the Prime Minister’s call for big businesses to pay suppliers promptly to help stave off a coronavirus-fuelled recession.

It comes after Solomon Lew’s Just Group, which owns Just Jeans, Smiggle and Peter Alexander, suspended all services from its suppliers and imposed 180-day payment terms on outstanding invoices. Discount retailer The Reject Shop has also delayed payments to suppliers by one month.

“COVID-19 is having a devastating effect on the Australian retail industry and we anticipate retail sales across our portfolio of brands to be severely impacted, and may remain impacted for some time,” Sussan group finance manager Michael Marios said in a letter to suppliers seen by The Australian.

“As a result and to ensure that our business continues to operate efficiently throughout these tremendously difficult times, we will be extending our current standard payment terms to 90 days. Please understand that this decision has not been made lightly.”

Just sent a similar letter to suppliers and also reissued its payment policy, which urges suppliers to discount bills if they want to be paid earlier. For example, if a Just supplier wants to be paid within 60 days, they have to cut their bills by 2.5 per cent.

The discount increases as the payment term decreases, with suppliers copping a 3.75 per cent hit if they want to be paid within 30 days, a 4.5 per cent hit within 14 days and 5 per cent haircut for payment within seven days.

“The COVID-19 pandemic has caused unprecedented disruption to the retail community. Unfortunately (Just Group’s) operations are not immune,” Just’s letter to suppliers said.

“It is with this in mind that we all have to deal with significant hardship in the short term in order to ensure our partnership can rebound in the longer term.”

Small Business Ombudsman Kate Carnell said while retailers struggled from shutdowns and social distancing, it was unacceptable for big companies to delay payments to smaller suppliers.

“It’s not reasonable and it is not fair … and it just makes life worse for the smaller businesses,” Ms Carnell said.

“Sussan and the Solomon Lew group are big and I give you that they have … cash flow issues and all the rest of it. But what you don’t do is push your problem down to people who have got their own problems and have got so much less flexibility than you do.”

Opposition employment and industry spokesman Brendan O’Connor said big businesses should not use the pandemic as an excuse to blow out payment times.

“The government has had more than six years to improve payment times for small businesses and if there ever was a time to introduce a fair payment times policy, it is now,” he said.

“We are seeing some larger businesses grossly delay payment times by 180 days. Many smaller businesses will cease to exist if these terms are enforced.”

Last month, Mr Morrison called on big business to fast-track payments to their small business.

Retailers aren’t the only ones shifting COVID-19 pain to suppliers. US Energy major 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 urging its suppliers to discount their invoices in exchange for early payment.