Telstra dumps supply chain financing as Canberra tackles payment times

Telstra has announced it will stop using supply chain financing, as the government moves to introduce legislation that addresses small business complaints about protracted payment times.

Small Business Minister Michaelia Cash told The Age and The Sydney Morning Herald the government would move to enact the small business payments transparency register Prime Minister Scott Morrison first unveiled in 2018.

Small Business Minister Michaelia Cash will move to introduce legislation on small business payment times in autumn. Credit: Alex Ellinghausen

"The government is introducing legislation in the autumn sitting of Parliament that will require Australian businesses with an annual turnover of $100 million or more to report how and when they pay their small business suppliers," Ms Cash said.

Upon passage through parliament, Ms Cash said the payments transparency register would come into force by January 1, 2021.

The move comes as businesses including Rio Tinto and Telstra have come under scrutiny in a series of articles published in The Australian for their use of "dynamic discounting" provided by San Francisco-based financial services company Taulia, which cuts invoices by about 2 per cent if a supplier wants to be paid within 30 days.

Rio Tinto said it would abandon the practice and, on Thursday, a spokesperson for Telstra said it would stop using supply chain financing altogether.

"We have made the decision to stop enabling a supply chain financing option and are working through how that will occur in a way that doesn’t disadvantage our suppliers," the spokesperson said.

"Telstra did not receive any fees or commissions when suppliers chose to use the supply chain financing option."

Vodafone is also listed as a client on Taulia's website, however, the telecommunications company did not respond to a request for comment.

Small business ombudsman Kate Carnell said she was "fairly horrified" at the use of dynamic discounting.

"I think that using big data to determine just how desperate a small business might be and just how big a discount they might be willing to take is over the line, it's unethical," she said.

The Business Council of Australia's voluntary payments code, which was launched in 2017 as a way of driving big business towards a public commitment on 30-day payment terms for small business, has also failed to deliver change.

Ms Carnell said the small number of businesses that signed up to code was "disappointing" and action was needed from the government.

A Graeme Samuel-led review of the BCA code last year recommended changes to the definition of a small business to ensure more businesses were protected, however, Ms Carnell said many companies, including Telstra, were only complying with the earlier version of the code.

A spokesperson for Telstra said it was also considering its payment terms and what defines a small business.

"They are compliant but they wouldn’t be compliant if they signed it now," Ms Carnell noted.

"Herein lies the problem with voluntary codes. If these large, often multinational and Australian companies can't bring themselves to pay SMEs in 30 days or less, than the government will have to legislate," Ms Carnell said.